When Putin set out to invade Ukraine, the world wasn’t sure what he was up to. But while threats were exchanged, Russia was struggling over a variable left unaddressed in the war effort: crypto.
Since the start of the war, Ukraine has continued to receive donations in crypto. Sanctions have also forced Russian hands to turn to crypto. Bitcoin, Ethereum, etc. have been put in the spotlight. More than $50 million in cryptocurrency has been donated in over a week since it opened Bitcoin and Ethereum wallets and announced the addresses on Twitter last week.
But many questions have continued to rage: Should Russians still have access to crypto to evade sanctions? Should Crypto Exchanges Ban Russians? Is Crypto Really Decentralized If Russians Can Be Cut Off The Blockchain Abruptly?
The war has shed light on crypto principles
Since the beginning of the war, cryptocurrency trading in Russia has increased dramatically. The rise is partly due to the Central Bank of Ukraine’s tight capital controls and SWIFT sanctions, which include limitations on ATM withdrawals, a suspension of the FOREX market and restrictions on official electronic transaction networks.
As Russian President Vladimir Putin’s army invades Ukraine, two economies that have been at the forefront of adopting the new form of digital currency are now turning to it to gain a competitive edge in the geopolitical conflict. The first major conflict of the crypto era also means that, for the first time ever, both parties have access to a mechanism that can easily move billions of dollars across borders.
Related Article | EU monitors crypto exchanges to ensure implementation of Russian sanctions
The government of Ukraine has solicited cryptocurrency donations on Twitter following its invasion by Russia. Deputy Prime Minister of Ukraine Mykhailo Fedorov tweeted the wallet addresses for donations.
Stand by the people of Ukraine
Now accepts cryptocurrency donations. Ether. Bitcoin and Tether (USDTtrc20)
BTC — 357a3So9CbsNfBBgFYACGvxxS6tMaDoa1P
ETH — 0x165CD37b4C644C2921454429E7F9358d18A45e14
USDT (trc20) – TEFccmfQ38cZS1DTZVhsxKVDckA8Y6VfCy
— Mykhailo Fedorov (@FedorovMykhailo) February 26, 2022
The Biden government and European officials say they are stepping up blockchain surveillance to capture all Kremlin-related activity. Ukrainian officials have requested that all Russian accounts on cryptocurrency exchanges be frozen. Crypto exchanges agreed to create a blacklist. However, they refuse to ban all Russian accounts, claiming that doing so would endanger the libertarian culture of the cryptocurrency community. That doesn’t mean the Kremlin will have it easy.
BTC/USD is trading at $40,000. Source: TradingView
The US Treasury Department announced on March 1 that sanctions against Russia will include digital currency controls. Major crypto exchanges have also been ordered by the White House to avoid doing business with sanctioned companies.
In an executive order, the government says it will take action against anyone violating Russia’s sanctions, including through the use of digital currencies.
During the Russo-Ukrainian War, many politicians, influential figures, and government agencies like the US Treasury focused on spreading a narrative that portrays crypto in a negative light, however, several of their reasons have been proven wrong.
Crypto is the real money?
Having financial freedom for everyone is one of the main goals of cryptocurrency. Crypto is meant to be an unbiased instrument, free from the ties that bind governments and banks, and a weapon against oppression and dictatorship.
Is your money really yours when regimes and governments can take it away from you? Because of this, many people now believe that Bitcoin is the only true currency.
The basic notion of cryptocurrency is that it is money, but it is uncontrolled. The original cryptocurrency Bitcoin was founded by honest libertarians who valued their privacy and wanted to keep their money out of government hands.
It is true that cryptocurrencies have been used in the past to circumvent international sanctions. North Korea used ransomware operations to amass significant Bitcoin sums; The regime has converted an unknown amount of money into usable currency, most likely in the tens of millions.
Tom Robinson, chief scientist and co-founder of crypto analytics firm Elliptic said:
“With no central controller to impose its morality on its users, crypto can be used to crowdfund the Ukrainian army or help Russia circumvent sanctions.”
“No one can really stop it being used in any way,” he added.
A spokesperson for the world’s largest crypto exchange, Binance, told CNBC that crypto “is intended to offer greater financial freedom to people around the world” and a blanket ban “would go against the reason crypto exists.”
Kraken CEO Jesse Powell tweeted that the company “cannot freeze the accounts of our Russian customers without a legal obligation.”
Due to this libertarian principle of crypto, many crypto exchanges have been criticized for continuing to facilitate crypto transactions for Russians. Hilary Clinton noted in a recent interview that she was disappointed with “so-called crypto exchanges.” She said:
“I would hope that someone at the Treasury Department is trying to figure out how to rein in the leaky valves in the crypto market that could allow Russia to escape the full weight of the sanctions.”
“Some philosophy of libertarianism or whatever,” she sneered.
Perhaps this shows that the inability to control crypto is a problem for a world order? Financial freedom and the impartiality of crypto are inherent problems for order and a world where few can decide whose money should be blanketly banned. It establishes a kind of utilitarian society where ownership or the value of your money does not depend on the misdeeds of your national government.
How powerful is crypto?
However, it remains to be seen how much of an impact this will have on the conflict. Bitcoin donations of a few hundred thousand dollars, while symbolic, mean little for a Ukrainian army that received $650 million worth of weapons from the US last year and is still severely undermanned.
Last Monday Vice President Joe Biden announced the delivery of $350 million in military aid to Ukraine. The EU responded with a pledge of $500 million in military aid, an unprecedented gesture. In addition, the White House is asking Congress for an additional $10 billion. Cryptocurrency transactions are a drop in the bucket.
And the cryptocurrency’s high transaction fees are eating away at what Ukraine is getting. In the last week, the cost of a bitcoin transaction has tripled. Gas fees on Ethereum, which trades a variety of coins, have been more consistent, although users have often ranted about how expensive they are.
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Featured image from Shutterstock, chart from TradingView.com
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