Crypto in the Russian-Ukraine War: Aryan Panjwani

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Each day, we consume countless hours of information through the internet using our phones, televisions, and laptops. Being just over two weeks since the beginning of the Russia-Ukraine War, most of us have seen images or read pieces covering the war-torn country and the physical damages resulting from this conflict. Lesser known is the economic war fueled by sanctions and algorithmic digital currencies between western powers and Russia. 

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Russia

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Upon the Russian invasion of Ukraine, the U.S. was quick to impose monetary sanctions on the Russian institutions and important officials. Additionally, Canada, the U.S., and other European countries removed Russia from SWIFT, a messaging network used by banks and other financial institutions internationally. This removal effectively disconnects Russia from the global financial market and heavily devalues the Russian ruble. 

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Some speculate Russia will respond using today’s new and fastest-growing asset class: cryptocurrencies. With cryptocurrencies being largely decentralized, Russia can attempt to circumvent these sanctions by avoiding traditional financial routes and using digital wallets to exchange between different cryptocurrencies. 

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This seems like a viable plan to the common eye, but there are some fundamental flaws. First off, cryptocurrencies work using blockchain technology. In layman's terms, a blockchain is an immutable digital ledger available on a vast network of computers. This makes tracing transactions on the blockchain quite simple and ineffective in trying to circumvent sanctions. Furthermore, relative to the global financial market, cryptocurrencies, even as popular as Bitcoin, lack the liquidity needed by a country like Russia and its companies to move funds around practically. Lastly, sanctions imposed also include the primary crypto exchanges to act in accordance. As per CEO Brian Armstrong, Coinbase is “blocking transactions from certain IP addresses that may belong to sanctioned individuals or entities.”

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On the other hand, cryptocurrencies can serve as a lifeline for ordinary Russian citizens who have faced the consequences of their government’s actions. Chief executives for large exchanges such as Kraken and Binance have explicitly condemned the war but are against freezing ordinary citizens’ assets in order to uphold Bitcoin’s ‘libertarian values.’

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Ukraine

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For Ukraine, crypto-adoption has led to some impressive benefits. As of March 11th, Ukraine has received about $63 million in cryptocurrency donations through Bitcoin, Ethereum, TRON, Polkadot, Dogecoin, and Solana, according to blockchain analytics firm, Elliptic.

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We also see the emergence of NFTs used in a charitable manner. An anonymous donor contributed a Cryptopunk NFT worth around $200,000 to Ukraine’s relief, and a prominent figure in the NFT space, Andrew Wang, created “RELI3F”. This NFT collection’s primary sales revenue went directly to efforts in Ukraine. All royalties from secondary sales are used “towards those same efforts, or towards supporting Ukrainian artists, charity, and/or art initiatives of the participating artist’s choice.”

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Here is a tweet from a Ukrainian that further highlights the role we will likely see digital currencies play in years to come.

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Conclusion

The growing influence of bitcoin and other cryptos in the global political and economic atmosphere is undeniable. Whether it's Russian entities attempting to bypass sanctions or serving as a lifeline for Ukrainians, the adoption of cryptocurrencies will only continue to grow from here in its libertarian venture to decentralize the world. What comes next is how centralized authorities strive to

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This article was written by Aryan Panjwani, a member of Texas Blockchain's Finance Team.