Let’s be cautious about vilifying the only tool at our disposal for preventing financial hardship for Ukrainians and Russians.
Israeli serial entrepreneur Ariel Shapira analyses developing technologies in the crypto, decentralised finance, and blockchain space, as well as their responsibilities in creating the economy of the twenty-first century, in his monthly crypto tech column.
Economic warfare is inextricably linked to geopolitical conflict, and, as with physical combat, innocent civilians are frequently caught in the crossfire. The introduction of cryptocurrencies, on the other hand, has changed the dynamic slightly this time. As the Russian invasion of Ukraine sends shockwaves through global markets, many are promoting digital assets as a safe haven during the chaos. Russians and Ukrainians, for example, are taking advantage of the traditional-finance option.
Crypto has been used to generate donations for millions of fleeing refugees and citizens who have remained to defend their homes in Ukraine. On the Russian front, the storey becomes more difficult. Some believe that oligarchs could use crypto to get around NATO sanctions. Cryptocurrency, on the other hand, is held by 17.3 million Russians. The majority of those folks aren’t oligarchs. Most of them, it is reasonable to assume, are law-abiding citizens who are leveraging digital assets to save their jobs.
So, let’s set the record straight here: The Ukraine crisis has demonstrated that cryptocurrency is a strong weapon that allows regular people all around the world to help others in their time of need. Crypto has previously been linked to charity, with organisations such as XMANNA, a metaverse game platform, rewarding members with 40% of their income. Now, cryptocurrency’s heretofore low-key philanthropic side is being publicly used to aid Ukrainian refugees and innocent Russians alike.
The front lines in Ukraine
As they are forced to forsake life as they know it, Ukrainians are turning to cryptocurrency as a financial lifeline. Outside of the conflict, many people are donating $108 million in Bitcoin (BTC) and Ether (ETH) to the Ukrainian government and NGOs. And, because to blockchain’s openness, we can now trace how these donations are spent better than we could 15 years ago – Ukraine has already spent $15 million of the funds raised on military equipment.
Traditional contribution platforms like GoFundMe and Fundly pale in comparison to the speed and convenience with which bitcoin donations are transferred from donor to receiver. Crypto transactions are quick, whereas traditional fundraising methods might take up to five days to execute wire payments. Even Bitcoin’s supposedly poor transaction speed (up to six minutes) pales in comparison to older techniques.
Indeed, the efforts to help Ukraine are merely the most recent, and arguably most widely publicised, examples of blockchain’s ability to alter fundraising. SeedOn, for example, uses a smart-contract escrow architecture to ensure that funds are only accessed in stages, preventing misappropriation. Such fundraising strategies are expected to become much more common in the future, far beyond the current Ukraine issue.
With Ukrainian banking institutions restricting client access to their funds, cryptocurrency is one of the safest ways for ordinary Ukrainians to access their funds without worry of their accounts being closed. This is critical for those who require rapid access to cash, whether to buy basics or safeguard personal funds before exiting the country.
If someone is dealing with the unbearable impacts of war, downloading a MetaMask wallet may not be the first thing that comes to mind, especially if they have never used cryptocurrency before. Nonetheless, Ukraine is ranked fourth on the global list of nations that have adopted cryptocurrency, indicating that a substantial number of Ukrainian citizens have the choice of using this alternative financial technique to survive. While access may be limited, individuals who do have it may be able to save their lives.
The opposite side of the sword
SWIFT, the worldwide messaging system that connects financial institutions, has been cut from a number of Russian banks. While the penalty isolates targeted institutions from the world economy, it also has a domestic impact by blocking transactions using any card issued by major credit card networks such as Visa, Mastercard, or American Express. Due to the fact that only 20-25 percent of domestic transactions and messaging are conducted outside of SWIFT, Russian citizens raced to ATMs in droves, withdrawing nearly three trillion rubles ($23 billion) at the time of writing.
The value of the Russian ruble has plummeted as a result of the sanctions, with the currency hovering at a 30% reduction in value compared to a week ago. While traditional Russian banks struggle from sanctions, customers can transfer their deteriorating money to crypto to safeguard their wealth and provide liquidity when bank access is less secure. Trading volumes between the ruble and Tether (USDT) have tripled since last week, according to Reuters.
While Russian crypto holders use their digital assets, detractors dismiss them as a means for Russians to circumvent sanctions. This is based on scepticism rather than fact. The blockchain, more than any other asset or commodity, provides a record of money transfer. Coinbase CEO Brian Armstrong acknowledged that the exchange has not witnessed an increase in oligarchs trading cryptocurrency. Because of the extreme traceability of digital asset exchanges, he was only able to make such a remark.
On a macro level, the European Union and the Western world have adopted sanctions against Russian President Vladimir Putin and his circle, which are at the heart of this conflict. On a more personal and interpersonal level, however, it is apparent that Russian bystanders are suffering. It is wrong to demonise the one instrument they have to alleviate their misery.
Disclaimer: These are the writer’s opinions and should not be considered investment advice. Readers should do their own research.
