In the Russia-Ukraine conflict, will the war affect cryptocurrency?
In times of crisis, there is no good; there’s only the best course of action, given the circumstances.
Is crypto good in the context of Russia’s invasion of Ukraine? Is it wrong or Neutral? It’s one of the hard questions to answer!
Cryptocurrency is now a more mainstream part of the global financial system. This means that — for better or for worse — it’s inevitably a part of international conflict, too. This is on full display as Russian forces invaded Ukraine.
Few Ukrainians are also turning to crypto as an alternative to Ukrainian financial institutions. This is basically limiting people’s access to bank accounts and foreign currency.
In a scenario where governments are in chaos, it’s difficult to only rely on the traditional banks, and there’s fear of surveillance. So a relatively anonymous system where no government is involved is appealing.
Furthermore, The Ukrainian government was requesting donations in crypto and raised at least $54 million on March 11. The Ukrainian government has already spent at least $15 million on crypto. Further, it’s received and has brought on several crypto companies to help, including FTX, Kuna, and a company called Everstake.
Speaking of the government, It has recently also launched a website to centralize its crypto-based fundraising effort. This new website explains that Ukraine is indeed accepting several cryptocurrencies, including bitcoin and the meme-inspired Dogecoin, to support its fight against Russia and that it’s also open to fiat currency donations, too. (“Want to HODL? Send Cash,” the site says.) Because the country’s officials can’t make all the purchases they want using crypto, they sometimes convert some of these donations into fiat currency to buy supplies.
Will War Affect Cryptocurrency? or Cryptocurrency will affect the War?
Just how useful avenue crypto is for people in crisis or organizations in need of donations is up for debate. You need a relatively sophisticated understanding of technology to use crypto, and if you weren’t already set up for it, the onset of war might not be the moment to try to do it. Plenty of donations to Ukrainian groups are flowing in just fine using more traditional currencies — one such group was banned from Patreon because fundraising for military equipment violates the platform’s rules.
More broadly, cryptocurrencies are pretty volatile. While proponents of the crypto space often argue that bitcoin and the like are some sorts of “digital gold,” they’ve lost value amid global uncertainty, undercutting the argument that they’re a kind of safe haven.
If you imagine a scenario where you take $1,000 out of Ukraine in a cryptocurrency, and by the time you’re able to convert it back to cash, it’s lost half its value, that’s not ideal. But what if crypto is the easiest way to get money in a crisis? Is it better than nothing at all?
Ukrainians are using crypto, However with the Limitations!
Right now, at least some Ukrainians escaping the country seem to be taking their crypto with them, which they hope to convert back into fiat currency once they arrive in safety. Others seem to be looking toward crypto as a way to store their wealth as Ukraine’s economy collapses.
Furthermore, the country’s central bank suspended electronic cash transfers at the start of the invasion. They have blocked Ukrainian citizens from withdrawing foreign currency for many types of transactions. In the last week of February, trading on the Ukrainian crypto platform Kuna reached its highest level since May 2021.
Using crypto in the middle of a crisis isn’t necessarily easy. For one thing, you need an internet connection and a working device. You also need to know how to use crypto, which has a steep learning curve and is something people aren’t going to be able to pick up quickly in moments of crisis.
