Ukraine’s Foresight on Crypto is Helping Fund Their Fight
In 2021, Ukraine’s President Zelensky made a pilgrimage to Silicon Valley to form partnerships with crypto executives. Ukraine’s parliament had already legalized cryptocurrencies and the nation ranked 4th in Chainalysis’ 2021 Global Crypto Adoption Index.
Because of Ukraine’s acceptance that crypto is part of the future of the world economy, the money needed to fight the Russian invasion. Donated crypto is being deployed almost immediately, and millions of dollars’ worth have already been spent on supplies like food, night-vision goggles, and bulletproof vests. As much as 40% of Ukraine’s military suppliers now accept crypto payments. Crypto donations have come in the form of BTC, ETH, Dogecoin, Polkadot, and Tether, among others.
Ukraine’s success in using crypto spotlights many of its best-use cases, first and foremost as a fast, global, and borderless alternative to traditional banking infrastructure. Cryptocurrency has enabled seamless, cross-border transactions and facilitated near-instant payments to goods suppliers, while also building a global community of people willing to work together digitally in support of a cause they believe in.
Is the Cryptocurrency Culture Good or Bad for Ukraine?
Ukraine is depending on international economic sanctions to cause as much pain to Russia as possible and to force Putin to withdraw from Ukraine – not to mention the pain it’s inflicting militarily. But while cryptocurrencies are helping to support Ukraine’s survival, the “wild west” ideals of its founders may provide workarounds for those sanctions.
For example, there are the “libertarian” tendencies that surround the cryptocurrency culture that wants to keep crypto away from the influence of governments and the international banking system. Many major cryptocurrency exchanges were defiant last week when Ukraine asked them to freeze any accounts belonging to Russian, which didn’t sit well with exchanges, citing crypto’s history of libertarian ideals. However, “do as we say not as we do” is the mantra of those individuals in positions to do something to help. Because of their personal revulsion at the unprovoked war on Ukrainian civilians, many began to comply with the sanctions aimed at devastating the Russian economy but with little or no fanfare.
Digital coins have lived up to their reputation for easily moving money across international borders, with the Ukrainian cause having raised the equivalent of more than $54 million through cryptocurrency donations. But on the Russian side, the supposedly borderless form of money has instead collided with the reality of international sanctions as well as the moral question of whether participants in the crypto markets could unwittingly help fuel the war or help Russian oligarchs preserve their wealth.
This divide between what crypto’s biggest players say and what they do is a challenge to crypto’s integration as a mainstream industry. It is now, during a geopolitical and humanitarian crisis, that Bitcoin and Ethereum et al, must stake out their positions as economic players. They should do what they can to embargo crypto transactions in places such as Russia that are flaunting international law and thus be taken more seriously.
Evading Sanctions Vs. Criminal Activity
Can Russian President Vladimir Putin be able to evade sanctions on a large scale? Probably not, as the crypto market isn’t big enough. Also, crypto exchanges have dedicated compliance officers just to catch money laundering.
“We have a number of sophisticated tool sets that allow us to understand who are sanctioned individuals, sanctioned nations, be able to track cryptocurrency and fiat deposits and withdrawals, and make sure that we block those users, as we have been doing since our inception”
And Sen. Elizabeth Warren, D-Mass., and three other Democratic senators this week sent a letter to Treasury Secretary Janet Yellen seeking assurances that Putin wouldn’t be able to use digital coins to evade sanctions.
“Cryptocurrency can allow financial criminals, drug dealers, and tax cheats to move money around in the shadows — potentially opening the door for Putin and his cronies to evade the economic sanctions that serve as the centerpiece of the international response to Russia’s invasion of Ukraine,” Warren said in a statement to NBC News. “Financial regulators need to address this urgent threat to ensure that crypto doesn’t undermine our national security.”
And while it’s believed to be a truism that digital coins can’t be confiscated, U.S. authorities seized $3.6 billion in bitcoin in one confiscation last month, with agents in that case using a search warrant to obtain access to an online account where one of the alleged thieves kept the private keys required to access his digital wallet.
That means that while we have the ability to damage criminal activity, we may also have the ability to go after cryptocurrencies that are being used to evade sanctions against Russia and Putin to help Ukraine.
Conclusion
With the integration of crypto into the world economic system and the early adoption of these coins by Ukraine, a new weapon has been added to the international arsenal opposing Russia. How this will end is unknown. The fact that crypto has been an integral part of Ukraine’s defense is just one more reason to believe the future of crypto is brighter than previously thought.