Since the Russian invasion, cryptocurrencies have provided vital support for Ukraine, while helping fund Moscow’s war efforts.
Cryptocurrencies are reeling, suffering from a bursting investment bubble to Sam Bankman-Fried’s criminal fraud. They are blamed for facilitating illicit transactions. There’s even a new film “Bitconnned” that tracks the rise and fall of a company that promised — dubiously, in retrospect — to make crypto assets accessible via a debit card.
Yet crypto continues to play a role in the Russia-Ukraine war.
After the February 2022 full-scale Russian invasion, Ukraine experienced a run on its banks, a halt in the domestic currency market, and a steep devaluation of the Ukrainian hryvnia. For immediate financial aid, Kyiv turned to digital currencies such as Bitcoin, Ethereum, and Tether, sharing wallet addresses on social media.
It worked. By 2023, Ukraine ranked fifth on Chainalysis’ Global Crypto Adoption Index. The Ukrainian government successfully secured $225 million in cryptocurrencies and $190,000 worth of Ethereum-based non-fungible tokens, both through donations. Some $134 million was earmarked for humanitarian purposes and about $91 million for the military.
Before the war, Russia and Ukraine had significant grassroots adoption of cryptocurrencies. The war hastened adoption. Ukraine legalized crypto accounts in March 2022 one month after the invasion, authorizing accounts for crypto companies and allowing the surge in donations.
Admittedly, cryptocurrency contributions to Ukraine remain modest when compared to traditional financial aid. And crypto can be used for bad as well as good. Russia leverages crypto to fund its war effort. “Russian entities have turned to crypto under the heavy pressure of international sanctions, using it for private militia group fundraising, continued ransomware attacks, and attempted sanctions evasion,” says Andrew Fierman, Head of Sanctions at Chainalysis.
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Russian hackers are leveraging crypto. Since its inception in 2021, the pro-Russian cybercriminal group KillNet has raised funds through crypto. Russian hacker groups, like NoName057(16), are offering cryptocurrency rewards for effective cyberattacks. The Novorossia Aid Coordinating Center has successfully raised millions of dollars in cryptocurrency to buy ammunition, armor, and surveillance drones.
Crypto even has been linked to Rusich, a Russian neo-Nazi paramilitary fighting group. The neo-Nazi paramilitary group extorts bereaved families, offering to disclose the location of deceased relatives in exchange for Bitcoin payments.
Even so, experts believe Russia has been unable to use the technology on a large scale to evade Western sanctions. If Moscow attempted to convert large sums of currency into crypto, experts say it would stumble upon liquidity problems.
Ukraine believes they are benefiting more than Russia in leveraging crypto. Blockchain data analytics company Elliptic showed that private crypto fundraising for pro-Ukrainian causes has outpaced Russian equivalents by a rate of 44 to one in the first year of the war.
Whether Kyiv will continue to outrace Moscow in the crypto race remains unclear. As Western aid falters, Elliptic reports that crypto donations to Ukraine are dropping, while Russia’s crypto donations are increasing. Crypto has played an important role in the Russia-Ukraine war. But it represents no magic wand.
David Kirichenko is a freelance journalist covering Eastern Europe. He can be found on X@DVKirichenko.
Bandwidth is CEPA’s online journal dedicated to advancing transatlantic cooperation on tech policy. All opinions are those of the author and do not necessarily represent the position or views of the institutions they represent or the Center for European Policy Analysis.
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FAQs
Appiah-Otoo (2023), using a panel method with a sample of 20 countries from January 23, 2022 to April 16, 2022, found that the Russia-Ukraine war has affected the cryptocurrency market, especially Bitcoin exchange returns. The war caused Bitcoin trading volume to drop by 0.2%.
Is crypto supported in Russia? ›
In response to mounting financial pressures of Western sanctions, Russia enacted significant legislation legalizing cryptocurrency mining and permitting the use of cryptocurrency for international payments.
Is war bullish for crypto? ›
Under bearish and normal (bull) markets, War attention negatively (positively) affects all cryptocurrencies in the short term. Results are consistent with cryptocurrency investors responding to War attention by seeking liquidity, with recent price falls explained as sell-offs by large holders.
What is the Russian Parliament crypto bill? ›
The lower house of Russia's parliament on Tuesday approved a law that permits making international payments via cryptocurrencies, local media reported. Russia's central bank is itself looking to move money across borders using crypto before the end of 2024, Governor Elvira Nabiullina said.
What happened to Bitcoin when Russia invaded Ukraine? ›
Bitcoin—the digital asset most often referred to as an alternative to gold—plunged 8% within hours of Russia invading Ukraine, with prices tanking to $34,413 per coin.
What happens to crypto if we go to war? ›
For starters, bitcoin's a borderless medium of exchange, so it's not exposed to geopolitical risks in the same way as sovereign currencies. War or no war, bitcoin transactions will go through without a hitch. And since the blockchain is free of financial middlemen, banks can't freeze funds either.
Is cryptocurrency illegal in Russia? ›
MOSCOW, July 30 (Reuters) - Russian lawmakers passed a bill on Tuesday that will allow businesses to use crypto currencies in international trade, as part of efforts to skirt Western sanctions imposed after Russia's invasion of Ukraine.
Is crypto taxed in Russia? ›
Do you have to pay crypto tax in Russia? Yes, currently you have to pay a 20% Value Added Tax (VAT) on crypto in Russia. Under the new bill proposed in 2022, there is tax levied on the income generated from holding cryptocurrency and they are taxed as “securities”.
Which crypto is popular in Russia? ›
Bitcoin – the first and most popular cryptocurrency in the world totals to around half the overall crypto market cap. In 2020, Russia's Bitcoin trading volume on online exchanges was listed second in the world (after the US), with double the trading volume of the whole European Union.
What stocks will go up if there is a war? ›
Which Stocks Do Best During a War? In general, defense stocks (companies that produce weapons and armaments) tend to fare the best during a wartime environment.
Gold, government bonds, and certain strong currencies tend to be among the most sought-after safe-haven assets. With its physical value and scarcity, gold has historically been a hedge for investors against economic crises.
Which cryptos are set to explode? ›
Cryptos that could boom in 2024 include Render Token (a rendering network) and Solana. Bitcoin and Ethereum could also be poised for strong performances in 2024, thanks to the SEC's approval of Bitcoin ETFs and Ethereum ETFs.
What is the new Russian crypto? ›
Exved. Exved is a more recent entrant to the Russian crypto scene: It was launched by Sergey Mendeleev, the founder of Garantex. Exved is designed as a cross-border payment service powered by Tether's USDT stablecoin.
How much is cryptocurrency in Russia? ›
BTC to Russian Ruble conversion tables
The current value of 1 BTC is RUB 4,920,479.22 RUB.
What is the government cryptocurrency called? ›
A central bank digital currency (CBDC; also called digital fiat currency or digital base money) is a digital currency issued by a central bank, rather than by a commercial bank.
How does war affect the crypto market? ›
Cryptocurrencies, known for their price volatility, can exacerbate economic uncertainty during times of war. Governments often tighten regulations during conflicts, impacting the use of cryptocurrencies. Geopolitical tensions lead to an increase in cyberattacks, posing a threat to cryptocurrency platforms.
How did the Russian Ukraine war affect the markets? ›
The ongoing Russia–Ukraine conflict negatively impacts global stock markets. Sanctions imposed against Russia create economic setbacks, affecting local stock market. The conflict disrupts global trade relations, especially with the EU, leading to uncertainty for investors.
How does the Russian Ukraine conflict affect commodities? ›
The Russia–Ukraine conflict has affected commodity markets through both economic and financial channels and has significantly increased the risk of volatility. In fact, this is greater for raw materials, agricultural products and energy, with a higher global share of exports.
How did the war in Ukraine affect the financial markets? ›
Macroeconomic concerns such as energy-price-led inflation and rising rates, coupled with the political uncertainty caused by the war, led to equity-market drawdowns that lasted as late as September 2022 for all major global markets.
