Most of the cryptocurrency donations were made in the form of Bitcoin, Ethereum, and the Tether stablecoin.
Cryptocurrencies have taken on an unprecedented role in the Ukraine war, helping the government raise millions of dollars to fund its fight against the Russian invasion.
Why Ukraine turned to cryptocurrencies and what is the nascent crypto industry changing its reputation and making an impact amidst the clouds of war?
How much crypto has been raised?
At the start of the conflict, Ukrainian officials posted the addresses of two crypto wallets on their Twitter account, giving donors a direct and clear address to which to send contributions.
The portfolios attracted more than 10.2 million dollars (9.2 million euros) just four days after the start of the invasion.
Since then, more than $100 million in cryptocurrency has been raised, with the “Crypto Fund for Ukraine” run by Michael Chobanian, the founder of the Ukrainian crypto exchange Kuna, accounting for 60% of all donations.
"We are still collecting crypto. It is being spent on aid like daily rations and bulletproof vests and helmets," the 37-year-old Ukrainian told AFP.
Initially, two funds were created, one for humanitarian purposes and one to support the Ukrainian army.
However, after the violence escalated in Ukraine, the funds were merged and focused entirely on supporting the armed forces, Chobanian said.
He said the majority of crypto donations came in the form of Bitcoin, Ethereum and stablecoin Tether, a currency pegged one-to-one to the dollar.
What are the benefits of donating in crypto?
Aid packages sent to Ukraine in fiat money from the United States and the European Union dwarf crypto donations, but the latter allow people to get involved.
US crypto charity, "The Giving Block", told AFP that crypto donations have the potential to attract "younger donors" looking to support various causes.
Another reason crypto donations are valuable to Ukraine is because they are less influenced by geopolitical or macroeconomic factors. Chobanian points to the depreciation of the value of the Ukrainian hryvnia as a result of inflation.
An extra advantage of donating in cryptocurrencies is the speed of transfers. Bank transfers can take up to 24 hours to validate between two countries. However, cryptocurrency transfers usually take less time.
What are the drawbacks?
Despite the success of cryptocurrencies in aiding Ukraine's war effort, it hasn't always been easy.
In the early days of the conflict, the deputy minister for digital transformation wanted to issue Ukraine's own cryptocurrency as a symbolic gesture for the cause of kyiv, but the project was eventually cancelled.
To make matters worse, people took the opportunity to mint and market fake versions of the planned government-issued crypto.
"There was a lack of communication" within the government, said Chobanian, who now works closely with the ministry.
"It was the first day of the war," he remembers.
In addition, cryptocurrencies have become a basic part of the underground economy in Ukraine: they are used as a means of exchange in online crimes. tax evasion and capital flight.
According to data analytics firm Chainalysis, transactions from Eastern Europe to other regions are particularly high, with the company suggesting that “capital flight could explain” some of the crypto movement in the area.
What are the consequences?
Despite the risks associated with cryptocurrencies, Chobanian is confident that it will become a central part of the Ukrainian economy.
"When we win the war, we will rebuild Ukraine using blockchain technology. All of us are helped by cryptocurrencies," he said.
While Chobanian's aspirations may be very ambitious, they are based on real developments.
On Wednesday, President Volodymyr Zelensky approved a law that would provide a legislative framework for crypto platforms and users to operate within the country.
Caroline Malcolm, head of research and international public policy at Chainalysis, told AFP that the conflict in Ukraine "is forcing governments to develop their understanding of cryptocurrencies and their regulation."
She believes such discussions can be beneficial to the crypto industry, leading to "proportionate and effective regulatory policies."
Beginning last week, US President Joe Biden signed an executive order seeking further clarification and guidance on crypto regulation, demonstrating Washington's willingness to grapple with a new asset class in constant flux. increase.
© 2022 AFP
Citation: Bitcoin to the Rescue: The Role of Cryptocurrencies in Ukraine (March 19, 2022) Retrieved March 19, 2022 from https://techxplore.com/news/2022-03-bitcoin-cryptocurrencies-role-ukraine.html
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