From bitcoin and cryptocurrency donations to Ukraine to concerns that Russia may use cryptocurrency to circumvent sanctions, here’s how cryptocurrency is assisting both Russia and Ukraine in the midst of the conflict.
War is costly. Funding, like artillery, fuel, and boots on the ground, is thus an important resource in any conflict. Governments have traditionally borne the burden of financing, most notably through the issuance of war bonds. Ukraine is currently issuing war bonds worth US$270 million for this purpose.
Surprisingly, Ukraine is also relying on options that were not available until recently. Several days after the Russian invasion, Ukraine’s vice prime minister and minister of digital transformation, Mykhailo Fedorov, called on people worldwide to show solidarity with Ukraine by making crypto donations.
Donations had surpassed US$50 million at the time of writing. This is not in the same league as the value of war bonds or the financial and military aid offered by governments around the world, but it is not insignificant. It demonstrates how individuals can collectively have a state-like impact on the global stage.
This new method of gaining access to global private capital is a welcome addition to the world of cryptocurrencies. Ukraine’s government was able to raise funds quickly by going directly to the people of the world, eliminating the need for financial intermediaries.
However, as with all cryptocurrencies, there are benefits and risks in equal measure. They also have the potential to assist Russians in avoiding the crashing rouble, contrary to Ukraine’s demands.
With Russians also being restricted from moving money out of the country due to sanctions on Russian banks and capital controls imposed by their own government, many appear to be attempting to free themselves from the shackles of their national virtual identity to circumvent these rules. Russian demand for VPNs, which help people stay private online while using public networks, increased at least fourfold over the weekend and possibly much more.
There are also concerns about how cryptocurrency might affect the overall sanctions regime, which includes not only restrictions on Russian banks and oligarchs but also a freeze on the Russian central bank’s US$630 billion foreign reserves. Could Russian institutions circumvent these constraints by utilising cryptocurrencies?
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