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What role does cryptocurrency play in the Ukraine conflict?

Updated: Aug 31, 2024
Published: Feb 27, 2022
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During the conflict in Ukraine, we were made even more aware of the role cryptocurrencies play in a war situation. This article highlights some of the use cases we saw during the conflict.

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Can Russia circumvent sanctions with crypto?

As Vitalik explained in a tweet at the start of the conflict, blockchains are neutral and could potentially serve both sides of a war. On Saturday, the United States and the European Union announced that they would exclude a group of Russian banks from the international payments system SWIFT. The question now is whether cryptocurrencies could be used to circumvent those sanctions.

Sanctions are among the most powerful tools available to the United States and European countries to influence the behaviour of nations they do not consider allies. Currently, experts are unsure whether cryptocurrencies could weaken this power, as some say autocratic regimes may have difficulty adopting decentralized currencies and it is unclear whether they would be able to effectively circumvent sanctions with decentralized assets. However, other experts point out that the Russian Central Bank's digital currency, the digital ruble, which is under development, could allow companies to trade legally without the dollar in a state-sanctioned workaround.

Crypto donations & the introduction of a withdrawal limit

On Friday, it was announced that Patreon had taken offline a Ukrainian organization running a crowdfunding campaign in support of the country's military against a Russian invasion. Cryptocurrencies play an essential role here, as we have seen millions raised in Bitcoin and other cryptocurrencies through crowdfunding efforts. The value of donations to Ukraine to fend off Russia is $13 million. This includes 1,349 Ethereum, 204 Bitcoin, and various amounts in Tether (USDT) and USD Coin (USDC)

We have also seen a lot of activity in Ukraine. As demand for digital assets such as Bitcoin and Tether increased, it also affected the value of these assets against the hryvnia, as the National Bank of Ukraine introduced a limit on daily cash withdrawals to 100,000 hryvnias ($3,350). At one point, BTC traded on Kuna for as much as $42,106, $3,000 more than on other crypto exchanges, indicating a high demand for cryptocurrencies in the region .Some Ukrainian citizens shared on Twitter how their crypto holdings came to their aid in this time of need, clearly showing that it is not just a tool that could be used by Russia.

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