As tensions rise and conflict begins to escalate between Ukraine and Russia, cryptocurrency’s role in the conflict continues to grow and gain more significance. This conflict is one of the first in which crypto could be a key player on the financial side, and both countries are attempting to leverage cryptocurrencies to their advantage in order to gain an edge.
How Ukraine is using Crypto to Aid the War Effort
Ukraine’s plan for using crypto consists of receiving crypto donations in order to facilitate both military and other types of purchases. Ukraine is well-positioned to receive crypto, as it legalized it in 2021 and was ranked fourth for crypto adoption. Initially, the Ukrainian government only accepted Bitcoin and Tether, but now is open to accepting more than 70 types of cryptocurrency. As of March 3rd, more than 69.3 million dollars of crypto was said to have been donated to Ukraine’s government and NGOs, and as of March 9th, the Ukrainian government has increased that figure to nearly 100 million dollars, most of which comes from individuals across the world. In fact, in order to help facilitate the donation of cryptocurrency to Ukraine, Elon Musk activated his satellite internet service in Ukraine to help with the unstable internet. Ukraine’s donations are not limited to cryptocurrencies though, as NFTs were also donated to help the war effort. As of March 5th, the Ukranian government had received hundreds of NFT donations, including a CryptoPunk NFT valued at over $200,000, and a Ukrainian flag NFT sold for 6.5 million in Ether. The Ukrainian government has stated that while NFTs are valuable, they are illiquid and therefore not very helpful in the shortrun. As for crypto, the Ukrainian government has converted less popular cryptocurrencies into dollars and euros while still holding other cryptocurrencies such as Bitcoin and Tether. So far, around 15 million dollars worth of Ukraine’s crypto has already been used to purchase military supplies as well.
How Russia plans to use Crypto
Russia plans to funnel assets into crypto in order to lessen the impact of the sanctions placed on them. The U.S. Treasury Department has been monitoring whether crypto can be used to lessen sanctions, and a National Security Officer recently stated that crypto would be an ineffective tool for lessening the impact of sanctions. The reason being is that the cryptocurrency market simply is not ready to be used for that purpose, as it is not liquid enough nor deep enough to evade sanctions. However, Russian citizens are still able to take advantage of crypto, as they are unable to use credit cards and only have limited access to cash.
How has the War affected Crypto Prices
In the months leading up to the conflict, crypto prices fell heavily, and the market was said to have dropped around 4.18% in 24 hours according to Coinbase. Bitcoin fell 4%, Shiba Inu 7%, DogeCoin 2.3%, and many other coins fell drastically as well. However, Bitcoin and Etherium are recovering from this loss (likely caused by an immediate reaction to the conflict in Europe), as their prices continue to climb back, and cryptocurrency prices begin to rise again.