The conflict between Russia and Ukraine took center stage last month. The issue not only changed the global political landscape but also the economies of both countries. The financial infrastructure in Russia and Ukraine have shattered in the past few weeks, but, for different reasons.
While the financial system in Ukraine broke down due to Russia’s aggression, Russia itself suffered severely due to economic sanctions. In the recent mayhem, crypto came to the rescue for Ukraine. Not to replace the existing financial system, but to support the humanitarian aid efforts and recovery initiatives. According to Alex Bornyakov, Ukraine’s Deputy Minister at the Ministry of Digital Transformation, the country has received a total of almost $100 million in crypto donations.
Ukraine has already spent nearly $15 million worth of crypto donations on military supplies. The nation has received crypto support in a wide range of digital currencies including Bitcoin and Ethereum. Apart from donations, the adoption of crypto assets has increased in the country amid the demolished banking system in the region.
On the other hand, the usage of cryptocurrencies has climbed in Russia as well. The Ruble-denominated volumes are soaring. Reason? 'Rising Sanctions'. Just in the past week, financial services giants like PayPal and Western Union have suspended operations in Russia. In an effort to circumvent sanctions, Russians are moving towards digital assets for daily transactions. But, is it that easy to avoid sanctions through crypto? The answer is 'No'. Especially under increasing regulatory pressure on the crypto ecosystem.
However, the bottom line is that the adoption of crypto assets is surging in Russia and Ukraine. To dig deeper into the details about the rising use of digital assets in both countries, Finance Magnates sat down with prominent crypto stakeholders to have their opinion.
“Once again, cryptocurrencies have demonstrated their value through a series of unfortunate events for human lives. The Ukrainian and Russian economies lie in shambles for different reasons. In the first two weeks of conflict, cryptocurrency was used as a tool of peace and war, but chiefly as an instrument that empowers individuals amidst a clash of nations,” Brian Pasfield, the CTO at Fringe Finance, said.
“This is not the first armed conflict in the cryptocurrency age. Yet, it is proving to be the first in which cryptocurrency will be able to fulfill its intended role of returning power to individuals,” he added.
Crypto in Limelight
“The Russian invasion of Ukraine has brought cryptocurrencies into the limelight. It gave them more exposure in the media and among individuals in Russia and Ukraine who were looking to protect their assets from the effects of war. Cryptos have brought another dimension to the geopolitical equation as they have acted as an alternative to the traditional financial system to a certain extent when the latter seemed to fail in both Russia and Ukraine,” Daniel Takieddine, the CEO MENA at BDSwiss, explained.
Takieddine mentioned that the authorities in Ukraine have made significant efforts in the past few weeks to make the crypto community realize the magnitude of the issue.
Need for Regulation
According to Takieddine, it is important for global regulatory authorities to introduce clear crypto regulations.
“The popularity of digital assets during the conflict has also brought up the need for adequate regulation. In this regard, European and American authorities sped up the process of creating a regulatory framework in order to make sure that Russia would not be able to use cryptocurrencies to circumvent sanctions,” Takieddine added.
Potential of Crypto
“The role of digital currencies in the Russia-Ukraine conflict represents the tip of the iceberg when it comes to the inherent capabilities of the nascent asset class to make a difference in social conflicts. The current situation once again shows how complete dependence on traditional finance can put people in a hopeless situation. I believe it is worth considering crypto as an independent decentralized finance system that will be above sanctions and serve all sides, as it is currently doing in this Eastern European conflict, for the common good,” Daniele Casamassima, the Chief Executive Officer at Pure, said.
Alternative Assets
The recent surge in the adoption of crypto has reinforced the idea of digital currencies as alternative assets. Joaquim Matinero Tor, a Blockchain Associate at Roca Junyent, said: “Due to this war in Ukraine, we’ve seen that cryptos are good as alternative assets. The foreign minister of Ukraine asked for donations in BTC, ETH & other cryptos. This change of paradigm has shown the world that it’s a real alternative when things go wrong, and people started believing that such a 'wallet' protects all their savings and investments,” Tor noted.
