In his monthly crypto-tech column, Israeli serial entrepreneur Ariel Shapira discusses emerging technologies within the crypto, decentralized finance and blockchain space, as well as their role in shaping the 21st century economy.
Economic warfare cannot be separated from geopolitical conflict, and as with the violence of physical war, innocent civilians are often targeted. However, the advent of cryptocurrency changes the dynamic somewhat this time around. As the Russian invasion of Ukraine sends shockwaves across global markets, many are advocating digital assets as a safe haven amid destruction and turmoil. Indeed, Russians and Ukrainians are benefiting from the traditional-financial alternative.
On the Ukrainian front, crypto has been used as a fundraising tool for millions of refugees fleeing and civilians left to defend their homeland. The story gets more complicated on the Russian front. Some predict that oligarchs could circumvent NATO sanctions with crypto. On the other hand, 17.3 million Russians to hold cryptocurrencies. Most of those people are certainly not oligarchs. One can reasonably conclude that most of them are innocent citizens who use digital assets to earn a living.
So it’s time to clear up the story here: The crisis in Ukraine has shown crypto as a powerful tool that empowers ordinary people around the world to help others in their darkest hour. Crypto was previously intertwined with charity, with companies like XMANNA, a metaverse gaming platform, which returns 40% of its profits to users through rewards. Now the once withheld charity side of crypto is being publicly armed to support Ukrainian refugees as well as innocent Russians.
Related: Crypto Offers Russia No Way Out of Western Sanctions
The Ukrainian Front
Ukrainians are using crypto as a financial lifeline as they are forced to leave life as they know it. Outside of the war, many donate crypto such as Bitcoin (BTC) and Ether (ETH) to the Ukrainian government and NGOs, amounting to $108 million. And thanks to the transparency of blockchain, we can now better track how these donations are spent than we would have 15 years ago – Ukraine already has issued $15 million of the amount raised on military equipment.
The speed and ease with which more traditional donation platforms such as GoFundMe and Fundly transfer money from donor to recipient pale in comparison to crypto donations. While conventional fundraising options can take up to five days to process transfers, crypto transactions are instantaneous. Even Bitcoin’s notoriously slow transaction speed (up to six minutes) puts older methods to shame.
Indeed, the initiatives to help Ukraine are just the most recent and perhaps publicly mainstream iterations of blockchain’s potential to transform fundraising. Projects such as SeedOn use a smart-contract escrow model to ensure that funds are only used in phases, preventing misuse. Such models are likely to be much more common in fundraising well beyond the current crisis in Ukraine.
With Ukrainian financial institutions restrictive customer access to their finances, crypto is one of the surest ways for ordinary Ukrainians to access their funds without fear of frozen accounts. This is essential for those who need immediate access to cash, whether they want to buy supplies or access personal funds before fleeing the country.
If someone is suffering the insurmountable effects of war, downloading a MetaMask wallet may not be the first thing that comes to their mind, especially if they haven’t used crypto before. Nevertheless, Ukraine ranks fourth on the global list of countries that have already adopted crypto, meaning that a significant number of Ukrainian citizens have at least the option of using this alternative financing method to survive. While access may not be extensive, the option is potentially life-saving for those who have it.
Related: NFT Philanthropy Demonstrates New Ways of Giving Back
The other side of the sword
Several Russian banks have been disconnected from SWIFT, the global messaging system that connects financial institutions. While this sanction cuts the affected banks off from the global economy, it also: effects individuals domestically by disrupting transactions made on a card issued by major credit card networks such as Visa, Mastercard or American Express. With only 20-25% of domestic transactions and messaging outside of SWIFT, Russian citizens poured into ATMs and made withdrawals totaling nearly three trillion rubles, or $23 billion at the time of writing.
These sanctions have reduced the value of the Russian ruble, falter down about 30% from the value a week ago. While traditional Russian banks suffer the consequences of sanctions, crypto remains an option for people to convert their deteriorating fiat into crypto to preserve their wealth and ensure liquidity when access to the bank is less secure. According to According to Reuters, trading volumes between the ruble and Tether (USDT) have tripled since last week.
As Russian crypto holders tap into their digital assets, critics have shrugged them off as a way for Russians to evade sanctions. This is more rooted in skepticism than in fact. In any case, the blockchain provides a better overview of money transfers than any other asset or commodity. Coinbase CEO Brian Armstrong confirmed that the exchange has seen no surge in oligarchs trading crypto. He could only make such a statement thanks to the sheer traceability of digital asset exchanges.
At the macro level, the sanctions imposed by the European Union and the Western world, which are at the heart of this conflict, are intended to antagonize Russian President Vladimir Putin and his circle. But viewed on a more individual and personal level, it is clear that Russian bystanders are suffering. The only means at their disposal to escape that suffering is misplaced.
This article does not contain investment advice or recommendations. Every investment and trading move carries risks, and readers should do their own research when making a decision.
The views, thoughts and opinions expressed herein are those of the author only and do not necessarily reflect or represent the views and opinions of Coin-Crypto.
Ariel Shapira is a father, entrepreneur, speaker, cyclist and is the founder and CEO of Social-Wisdom, a consulting firm that partners with Israeli startups and helps them connect with international markets.