Let’s be careful when vilifying the one tool available to prevent financial suffering for Ukrainians and Russians.
In his monthly crypto tech column, Israeli serial entrepreneur Ariel Shapira covers emerging technologies within the crypto, decentralized finance and blockchain space, as well as their roles in shaping the economy of the 21st century.
Economic warfare can’t be separated from geopolitical conflict, and just like in the violence of physical war, innocent civilians often fall in the crosshairs. The advent of cryptocurrency, however, is slightly transforming the dynamic this time around. As Russia’s invasion of Ukraine sends shockwaves across the global markets, many are championing digital assets as a safe haven during destruction and unrest. Indeed, Russians and Ukrainians are taking advantage of the traditional-finance alternative.
On the Ukrainian front, crypto has been leveraged as a tool to raise funds for millions of fleeing refugees and citizens remaining to defend their homeland. The narrative gets more complicated on the Russian front. Some predict that oligarchs could bypass NATO sanctions with crypto. On the other hand, 17.3 million Russians hold crypto. Most of those people certainly aren’t oligarchs. One can reasonably conclude most of them are innocent citizens using digital assets to save their livelihoods.
So, it’s time to clear up the narrative here: The Ukraine crisis has shown crypto as a powerful tool that empowers ordinary people across the globe to assist others in their darkest hour. Crypto has previously been intertwined with charity, with companies like XMANNA, a metaverse gaming platform, giving back 40% of its profits to users via rewards. Now, crypto’s once low-key charitable side is being weaponized publicly to support Ukrainian refugees and innocent Russians alike.
Ukrainians are utilizing crypto as a financial lifeline as they are forced to abandon life as they know it. Outside of the war, many are donating crypto such as Bitcoin (BTC) and Ether (ETH) to the Ukrainian government and NGOs, amounting to $108 million. And, thanks to the transparency of blockchain, we’re now able to better track how these donations are being spent than we would have just 15 years ago — Ukraine has already spent $15 million of the amount raised on military equipment.
The speed and ease with which more traditional donation platforms like GoFundMe and Fundly transfer money from donor to recipient pale compared with crypto donations. While conventional fundraising options can take up to five days to process wire transfers, crypto transactions are instantaneous. Even Bitcoin’s notoriously slow transaction speed (up to six minutes) puts older methods to shame.
Indeed, the initiatives to assist Ukraine are only the most recent and perhaps publicly mainstream iterations of blockchain’s potential to transform fundraising. Projects like SeedOn leverage a smart-contract escrow model to ensure that funds are only accessed in stages, preventing misuse. Such models are likely to become much more prevalent in fundraising well beyond the current Ukraine crisis.
With Ukrainian financial institutions limiting customer access to their finances, crypto is one of the surest ways for ordinary Ukrainians to access their money without fear of frozen accounts. This is essential for those who need access to cash immediately, whether to purchase necessities or to secure access to personal funds before fleeing the country.
If someone is suffering the insurmountable effects of war, downloading a MetaMask wallet might not be the first thing that occurs to them, especially if they haven’t used crypto before. Nevertheless, Ukraine ranks fourth on the global list of countries that have already adopted crypto, meaning a significant number of Ukrainian citizens at least have the option to utilize this alternative finance method in order to survive. While access might not be expansive, the option is potentially lifesaving for those who have it.
Multiple Russian banks have been disconnected from SWIFT, the global messaging system connecting financial institutions. While this sanction cuts off affected banks from the global economy, it also impacts individuals domestically by disrupting transactions made on any card issued by major credit card networks like Visa, Mastercard or American Express. With only 20-25% of domestic transactions and messaging existing outside of SWIFT, Russian citizens appropriately flocked to ATMs, withdrawing a total of almost three trillion rubles, or $23 billion at the time of writing.
These sanctions have caused the value of the Russian ruble to plummet, teetering around a 30% drop relative to its value just a week ago. While traditional Russian banks suffer the consequences of sanctions, crypto remains an option for people to convert their deteriorating fiat to crypto to preserve their wealth and ensure liquidity when bank access is less secure. According to Reuters, trading volumes between the ruble and Tether (USDT) have tripled since just last week.
While Russian crypto holders are making use of their digital assets, critics have shrugged them off as a way for Russians to bypass sanctions. This is rooted more in skepticism than in fact. If anything, the blockchain provides a greater record of money transfer than any other asset or commodity. Brian Armstrong, CEO of Coinbase, confirmed that the exchange has not seen an uptick in oligarchs trading crypto. He was only able to make such a statement thanks to the sheer traceability of digital asset exchanges.
On a macro level, the sanctions enacted by the European Union and the western world, which are at the core of this conflict, are meant to work against Russian President Vladimir Putin and his circle. But, viewed on a more individual and personal level, it is clear that Russian bystanders are suffering. To vilify the only tool at their disposal to escape that suffering is misguided.