Why an unstable world proves the point of cryptocurrencies (The Russian invasion of Ukraine)
IMPORTANT DISCLAIMER: This series will deal with current world events and their consequences. We will be discussing the actions of governments, social movements and individuals that we don’t support, and we will be speaking of decisions that we do not condone. Our argument is always for cryptocurrencies and what we consider to be every individual’s right to keep and use them. We argue for nothing else, including but not limited to whatever politics the people discussed in these articles espouse.
Hello, friends!
This is the second installment of our series about failure.
We have all found ourselves (at one point or another) enmeshed in the failure of governments, banks, financial institutions, and all the centralized institutions that came before Satoshi Nakamoto published his whitepaper.
We started our previous article by making a simple statement, that we will repeat now:
This article is now a part of history.
If you would like to read the first part of this series, please head here.
We will, however, remind you that the first Bitcoin transaction on the blockchain included a message that pointed to The Times article we have listed above.
Bitcoin and cryptocurrencies are commonly accused of being a solution looking for a problem, but this couldn’t be farther from the truth. Bitcoin and cryptocurrencies came to be as a direct response to a crisis that engulfed the entire planet and ruined millions of lives. A problem that wasn’t inevitable, as many said at the time, but a problem that was the direct result of the way our financial system works.
We aren’t in the business of politics, and these texts are not meant to be understood as an espousal of any political agenda. Our goal is always the same: to empower you, your business, your family, and the people you care about, to keep your finances safe as much as possible.
That means, obviously, that we vehemently condemn war.
War is the greatest threat to a free life we can possibly imagine.
That includes the Russian invasion of Ukraine.
We encourage all Ukrainian businesses to use our services entirely free of charge.
Today, we will be speaking about that very same Russian invasion of Ukraine.
But we won’t be speaking about the war itself. We will be speaking about the consequences of said war for those that are often forgotten: everyday people. People who have nothing to do with their governments’ decisions. People who are working a job, taking care of their families, going about their lives. People who hate nobody, and want to fight nobody.
Those people live in both Russia and Ukraine.
Why did Russia invade Ukraine?
Short answer? It depends on who you ask. The Russian Government has given us a bunch of possible explanations.
One day, they think Ukraine doesn’t really exist.
Another day, it’s because Ukraine is set to join NATO (even though they haven’t applied and NATO isn’t interested).
Maybe it’s because Kyiv is actually the capital of Russia?
This is by no means a comprehensive list. Russian authorities have given many different reasons for what they call a “special military operation” and have changed their story constantly.
If you ask most Western leaders, however, this is an unprovoked and unjustified attack.
Longer answer? This piece by The Guardian is a quick read that will give you the basics. A true explanation of this conflict, however, would demand delving into a library and staying there for a good long while.
So what happened when the war broke?
Several organizations (and we may have more news on that later 👀) are using the borderlessness of crypto to directly help those in most need. The UNHCR, the United Nations organization that helps refugees rebuild their lives, is working with several blockchain companies to fund their efforts.
Why is this necessary?
Because banking systems in Ukraine are under tremendous pressure. They haven’t failed (and we salute them for that!), but over 30% of branches across the country are closed, and a number of others are experiencing liquidity issues.
This is affecting banks elsewhere as well, because they are all connected.
Ukrainian media calls this a miracle, which it really is, but no one knows if the system can hold on much longer. Not even two months into the war, and the system was already operating at a loss.
The fact is: warzones are difficult areas to get money into.
But guess what kind of money doesn’t care about this?
Crypto can get anywhere as long as there’s Internet
Two days.
Two days was all it took for the Ukrainian government to ask the public for crypto donations. They were the ones on the ground, they were the ones that understood the risks. They were the ones that saw this incredible tech as a way to get money quickly, safely, and without strings attached.
Here’s how The Economist saw it:
“Wire transfers slowed, taking days to reach the country. Wise, a cross-border payments company, lowered its cap for transfers into Ukraine from $14,000 to as low as $200 (though it has since lifted it again). But as the need for fast funds grew Ukraine has looked to crypto assets to help its war effort.”
Can you imagine waiting days for a wire transfer when your country is getting invaded?
It’s insanity.
Crypto allowed the Ukrainian government to ensure their day-to-day operations remained funded as they moved to a war-time economy. Ukrainian deputy minister for digital transformation Alex Bornyakov makes it quite clear:
“Our banks were limited, there were restrictions on our use of fiat currencies and we were rapidly running out of supplies,” he said. “Even if you manage to pay in fiat, a wire transfer takes a few days to reach the recipient. In the crypto world, it takes minutes.”
The speed and reliability of these transfers and payments may have made the difference for Ukraine’s resistance.
With the country having already received close to $100M worth of donations in crypto, which doesn’t account for all the money donated to refugees and other causes, it’s safe to say Bornyakov and the Ukrainian government are sure to not regret their decision to embrace tech.
What about Russia?
Not the Russian government, mind, but Russian people.
As the world responded with almost unanimous condemnation to Russian aggression, European and American countries almost instantly agreed on at least one thing: sanctions.
Sanctions aren’t complicated to understand: they are economic punishments. The goal is to disincentivize specific behaviors. How? By making the population struggle. The idea is that a struggling population will put pressure on their government.
It’s not pretty, but it can work.
Russia was positively hammered with them.
Now, we are not going to debate the validity of sanctions in general or of these sanctions in specific. As we’ve said before, this series isn’t about politics or about political decisions.
What we will be doing is looking at how these sanctions affect the population of Russia, ordinary Russians that have had nothing to do whatsoever with the invasion. We have no real way of knowing how the majority of Russians feel about this invasion, but it’s no secret that plenty of people oppose it, and tens of thousands of people have bravely risked their lives and freedom to protest it.
All of those people were hit by the effects of sanctions.
Inflation is at 17.3%. Factories are closing down. Hundreds of Western companies have left Russia, leaving untold numbers of people unemployed.
So…
What happens to people’s savings?
What Russia is doing to manipulate the ruble’s price and keep its economy afloat is being called by experts a “Potemkin currency”. If you don’t know the story, this is a reference to Grigory Potemkin, former governor of Crimea under Catherine the Great. After she annexed the region in 1784, Potemkin wanted to please her. He wanted to show her how successful he was in populating the area with Russian villagers. So he built a mobile village, with fake houses and businesses, that he would build and rebuild alongside Catherine’s route when she visited.
There is obviously no way that Russia can keep holding its currency afloat with these desperate measures for long (20% interest rates! For savings in banks!). It’s all smoke and mirrors.
Some people, however, managed to flee. Care to guess how? Maybe we’ll just keep linking the stories.
We have no idea what impact crypto is having in the real lives of normal Russian people trying to keep their lives afloat during these times.
Press in Russia isn’t exactly free…
What we do know is that every specialist around the world was afraid that the people’s access to crypto would make sanctions less effective. It is undeniable that the strength of sanctions depends on the struggles of ordinary people, which pressure their governments.
Bottomline
Crypto has made it easier for the Ukrainian government to defend itself from invasion.
This is a fact.
Crypto is making it easier to fund the resettlement of refugees.
This is a fact.
Crypto is helping ordinary people keep their lives stabler throughout this horror.
This is a fact.
Crypto will provide ordinary people with some relief if the Potemkin ruble crashes.
This is a fact.
So can crypto fix war?
No.
There are things no technology can fix.
But it can fix some of the pain it causes. And that’s a lot.
