Crypto Landscape: Notes from Ukraine
Ukraine announced a target of $200 million to raise through cryptocurrency for the war effort on February 26. Since then over $67 million has poured in from across the world, putting up a stubborn defense against Russia’s invasion by pioneering a new source of financial support¹ Elliptic, a blockchain firm, traced over $54 million dollars transferred to Ukrainian wallets from over 89,000 users since the start of the conflict with Russia.²
“Today, cryptocurrencies are playing an important role in Ukraine’s defense,” Alex Bornyakov, Ukraine’s deputy minister for digital transformation, promoted on the website used to collect donations. Even the acclaimed Vitalik Buterin, a cryptocurrency investor and cofounder of Ethereum, created a DAO focused on Ukrainian citizens.³ Unfortunately, the newfound popularity of cryptocurrency in Ukraine hasn’t done it any favors with cybercriminals who increasingly occupy its dark underbelly and operate out of Ukraine and Russia.⁴ Under the backdrop of a recently signed regulatory framework, Zelensky has opened the doors to Ukraine being a streamline regional cryptocurrency hub. With donations pouring in from around the world, European Commissioner Christine Lagarde has cited how cryptocurrencies have been used to “circumvent… sanctions” placed on Russia.⁵ Ukraine has spent at least $15 million of the funds received on bulletproof vests and other defense supplies, according to Bornyakov.⁶
Cryptocurrency donations are a small but growing part of the total sum received by Ukraine. After raising $12 million on March 2, cryptocurrency donations have slowed although sales of NFTs have gone hand-in-hand with the solicitation of cryptocurrencies set aside for humanitarian reasons.⁷ The ubiquity of social media has allowed for the collection and distribution of cryptocurrency to take on speeds once deemed impossible.
Cryptocurrency transfers of course have the drawback that they lend themselves to scams and are a favorite currency of criminal organizations. Some have asked for crypto exchanges to ban Russian users wholesale but so far this has not occurred, though the regime of international sanctions and anti-Russia political climate might say otherwise.
Proponents of cryptocurrency point to it as a steady vehicle that has provided relief when traditional financial instruments like ATMs have proven of no use in a war-torn nation. The nearly hundred million dollars in cryptocurrency might pale in comparison to the Biden administration’s multi-billion wartime assistance, not withstanding hundreds of millions of EU aid, but it still plays a significant role in funding the war and other humanitarian efforts.
Michael Chobanian, the founder of a Ukrainian crypto exchange, has stressed that he was not being paid for his services and that the benefit of cryptocurrencies was their instantaneity. He tweeted on March 17th that the next crypto capital of the world would be “Kyiv, Ukraine!” While in jest, the fact that he has testified to the Senate Banking Committee and various international bodies signifies a precipice, solidifying a preeminent time a sovereign nation has funded its defense efforts through digital currencies. Financial censorship is on the horizon, critics warn. Will Ukraine continue to be the wild west of cryptocurrency dueling and duking? Only time will tell and Putin has time to spare.
Endnotes
7. https://fortune.com/2022/03/26/crypto-aid-ukraine-innovation-or-sideshow-alek-bornyakov/
