Crypto and War

  • 2022-05-12

As Russia – Ukraine conflict began, the world witnessed the first war in the cryptocurrency realm. The digital currencies are proving to be paramount in raising millions of dollars to arm Ukrainian volunteer fighters as well as feed the citizens of the country. 

How is Ukraine raising funds using cryptocurrency?

Michael Chobanian, the president of the Blockchain Association of Ukraine and founder of the Kuna cryptocurrency exchange in Kyiv, launched a campaign named ‘Crypto fund for Ukraine’s military’ just a couple of days after the commencement of the war. As a part of the campaign, Ukrainian officers shared two wallet addresses on their Twitter accounts, enabling donors to directly contribute to the campaign while ensuring complete transparency. Within merely four days, the wallets were able to collect a whopping amount of more than $10.2. Since then, the country has raised over $100 million. 

To echo Chobanian’s words, “crypto is saving lives, literally saving lives.” 

How is Ukraine using crypto funds raised so far?

Ukraine received small donations from people across the globe, making a total amount of over $100 million. The majority of the funding came in Bitcoin, Ethereum, and the stablecoin Tether. The military uses the funds to purchase helmets, boots, bulletproof vests, and scopes with rifles. In addition, the funds are used to feed people.

Initially, the country had established a couple of funds – one for the Ukrainian military and another for humanitarian purposes. However, the funds were later combined, in the wake of increasing violence across the country, and were geared towards the military. 

Ukraine is still collecting cryptocurrency to fund military needs. It would not be wrong to say that cryptocurrency is playing a major role in fulfilling the financial requirements of the country, especially during tough times like the ongoing war. 

What are the advantages of cryptocurrency funding?

Although Ukraine received funding in fiat currency from the United States, cryptocurrency funding came with the following set of advantages:

  • Participation of young donors

The Giving Block, a cryptocurrency charity in the U.S., believes that donations made in cryptocurrency tend to attract younger donors who readily contribute to various charity causes. This means that crypto donations have the potential to gain more adoption compared to fiat donations. 

  • Free from political control

Given that cryptocurrencies are not controlled by any government or financial institution, they are least affected by any macroeconomic or geopolitical factors. While the value of the Ukrainian hryvnia has depreciated due to inflation, cryptocurrencies remain unaffected by inflation in the country. This means that the value of cryptocurrency in Ukraine is the same as the value of cryptocurrency anywhere across the globe. 

  • Accelerated fund transfers

Cryptocurrencies eliminate the involvement of banks and other financial institutions, thereby leading to quick transfers. While bank wires can take up to 24 hours for their validation, when it comes to making a transaction between two countries, crypto assets reduce the settlement time to a great extent, as the transactions need not be validated and verified by any authority. A crypto transaction made between two countries can be executed in remarkably less time. 

Alex Bornyakov, the Deputy Minister of the Ukrainian Ministry of Digital Transformation for IT Development, stated that their banks were limited and people had to make restricted use of fiat currency as the country was quickly running out of supplies. Even if the payments were made in fiat, they would take days to reach the recipient, in contrast to crypto payments, which took only a few minutes. 

The current state of cryptocurrency in Ukraine

Ukraine had already started embracing cryptocurrency even before the war broke out between the country and Russia. Ukraine was ranked fourth for crypto adoption by Chainalysis, a crypto research group. 

However, the war fueled the use of cryptocurrency in the country and the government’s mission to create an ingenious, crypto and blockchain-friendly economy. A few examples that serve as a testament to the increasing crypto adoption in Ukraine include the following:

  • Permission to cryptocurrency exchanges to maneuver in the country. 
  • Implementation of anti-fraud processes to ensure that the consumers are protected against any kind of fraud. 
  • Appointment of the National bank of Ukraine and the National Securities and Stock Market Commission as regulators. 

The National Bank is expected to launch its cryptocurrency soon. 

The government of Ukraine has utilized half of the crypto funds that have been raised until now on rations, helmets, and medical supplies to deliberately spend on non-lethal weapons to ensure not to put off future donors. The government is quickly employing new ways to accept donations in cryptocurrency. Of late, the Ukrainian government launched an official website – Aid for Ukraine – to accept donations in nine cryptocurrencies including Ether (ETH), Bitcoin (BTC), Solana (SOL), Dogecoin (DOGE), Polkadot (DOT), Monero (XMR), and Tether (USDT).

Earlier in March, the government made an announcement that it would thank all those who contributed to the Ukraine fund, in the form of an airdrop. However, the plan was called off a few hours later, after diligently considering how frantic this strategy could be. 

Moving forward, Ukraine aims to be the first developed country to launch its collection of NFTs (non-fungible tokens), named Meta History: Museum of War, which will feature a non-fungible token from each day of the war, with artwork related to a news story. It is believed that the tokens would create an immutable record (which cannot be changed) on the blockchain to record and showcase the war while raising funds that would provide financial help in the country’s fight. 

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Cover image : Alotrobo / pexels

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