Ukraine Cryptocurrency Donations – The Whole Story…
In the last weeks, the Russian invasion of Ukraine led by Vladimir Putin has sent shockwaves around the world. First and foremost, millions of people are suffering senselessly. What’s more, this war has affected the financial world greatly, and the crypto markets are far from immune. If you’d like to learn more about that topic, we wrote an article all about how the Russia-Ukraine war affects your crypto portfolio.
In addition, most media outlets have covered the conflict and the public has responded strongly on social media and with many donations to support Ukraine’s defensive efforts. However, as opposed to previous conflicts, the Ukrainian government has received a substantial number of donations in the millions of dollars in Bitcoin, Ethereum, and other cryptos.
Why is Ukraine Raising Money with Cryptocurrency?
Engaging in warfare is an economic nightmare since it directs a huge amount of a country’s capital towards funding the conflict. Both the Ukrainian and Russian economies have been affected. In fact, the consequences can already be seen in the value of both the Ukrainian and Russian currencies, which have dropped significantly.
Apart from citizens from either country creating crypto wallets to shield themselves from the plummeting value of traditional currencies, Ukraine is raising any kind of funds or resources they can to support their defensive efforts, not just crypto.
That said, Ukraine has made many of its wallets’ addresses public on Twitter to request funding, which we touched on in our last article about the Russia-Ukraine conflict. What’s more, the country’s Ministry of Digital Transformation recently set up its own crypto fundraising site, Aid For Ukraine, for groups and individuals to pledge their support. As it stands, crypto holders have donated over $100 million in cryptocurrency donations and counting. In fact, Polkadot and Kusama founder, Gavin Wood, recently asked for a DOT address and then donated $5.8 million worth to the country.
CEO of the exchange FTX, Sam Bankman-Fried, also announced that all Ukrainian cryptocurrency addresses on his platform would receive $25.
According to CoinDesk, the total cryptocurrency donations sent to the Ukrainian government and NGOs, such as Come Back Alive, an organization providing support to the military, are divided as follows:
- 31.2% Bitcoin
- 33.7% Ethereum
- 17% Stablecoins
- 14.5% Polkadot
- 3.6% Other
By accepting crypto donations, Ukraine is able to fund military equipment, like bulletproof vests, helmets, and weapons, to help repel Putin’s Russian military.
But why exactly is Ukraine raising money in this way? During times of great human suffering, especially widely publicized ones such as this, the public tends to donate more. Therefore, many people were already looking to make a donation before Ukraine began to ask for international support.
How does crypto make this war different to any before?
Crypto donations have a distinct selling point that sets them apart from traditional currencies. Generally speaking, sending and receiving money on the blockchain is cheap, fast, and easy. This is especially true when you exclude Bitcoin and Ethereum, whose fees can reach high prices depending on the network volume.
Many Ethereum blockchain competitors, such as Avalanche (AVAX) and Terra (LUNA), and payment processing cryptos, like Stellar Lumens (XLM) and Ripple (XRP), make transferring funds from one person to another absolutely painless for your wallet. Most importantly, it can be done in seconds. In our experience, filing a transfer request with your bank, especially large sums, can unfortunately take several days.
Therefore, it is no surprise that during a crisis period where any amount of time is crucial to saving human lives, governments would start to accept donations in multiple cryptocurrencies.
According to Michael Chobanian, the founder of Kuna, a Ukrainian crypto exchange that is receiving donations, the funds are being used to buy food, gas, medical supplies, and firearms for civilians. It’s also being used to help fund the army, thanks to coordination by the Ministry of Digital Transformation.
Fundraising with non-fungible tokens (NFTs)
Apart from regular cryptocurrencies, the crypto community has also come together to create a plethora of NFT projects to raise funds to support the Ukrainian military and civilians.
Among these, there is Ukraine DAO, which is a collaboration between Nadya Tolokonnikova, digital artist Trippy Labs, and artist collective PleasrDAO sold an NFT of the Ukrainian flag for 2,258 Ether (ETH) ($6.75 million at time of the announcement).
Former Olympic boxing champion, Wladimir Klitschko (who is also the brother of Vitali Klitschko, the current mayor of Kyiv), collaborated with the artist WhlsBe to release an NFT collection. All of the funds from the sale would directly support Ukraine.
What’s more, more than 500 Ukrainian artists joined together to create a brand new NFT collection on Holy Water with the goal of raising $1 million. To date, they have obtained more than $52,000, according to their donation site.
Even Ukrainian government officials have been requesting crypto donations through NFTs. Ukraine’s vice prime minister, Mykhailo Fedorov, announced that the government would mint NFTs to help fund its military operations. Thanks to this move, the appeal managed to raise more than $54 million for the government and NGOs.
It’s clear to see how NFTs and crypto donors are providing essential services to help the Ukrainian military during Russia’s invasion.
How can cryptocurrency be a tool for democracy?
As opposed to opening a bank account, in its purest form, cryptocurrency does not impose any requirements upon users to get access to it. In other words, crypto doesn’t judge.
Although currently getting started in crypto without any fiat is a bit of a technical challenge, you technically don’t need a bank account or an intermediary to set up a private wallet, such as a Metamask or a Ledger.
In this sense, the crypto and blockchain sphere seeks to level the playing field for people around the world who are left out of traditional financial services. For example, people in Ukraine whose purchasing power is far weaker than more Western countries and increasingly so due to the conflict. By giving anyone access regardless of borders, crypto becomes a democratic tool that enables simple money transfers and wealth building.
For these reasons and a greater mainstream adoption and coverage by the media, crypto makes this war different to any before.
Can Russia use crypto to avoid sanctions?
The media has given a lot of attention to cryptocurrency donations to the Ukrainian war effort against the Russian invasion. However, news outlets have also focused on whether Russia and Putin can use digital assets to avoid sanctions. For context’s sake, it’s worth mentioning that many crypto critics that are not well-informed on the new age of digital technology have been claiming that digital currencies are a gateway for criminal activity. This assertion dismisses the fact that most crime still happens with fiat currencies, such as dollars, euros, and pounds.
In an interview with CNBC, Vijay Ayyar, vice president of corporate development and international at crypto exchange Luno, shared “The biggest misconception about crypto remains that it is untraceable and is primarily used for nefarious purposes, which couldn’t be further from the truth.” While it is technically possible for Russians to evade sanctions to a certain extent, this is quite a difficult and legally dangerous process.
Why? Because all transactions on the blockchain, the technology that underpins cryptocurrencies, are public. This means that it is possible to track every single transaction on a particular network, such as Bitcoin and Ethereum. In fact, it’s actually quite easy to do, which makes it an inefficient tool for the Russian government to avoid sanctions. However, it does provide a level of privacy with regards to obscuring how the funds are being used.
(If you want to learn more about what a blockchain is, check out our previous article where we cover the definition in more detail and teach you how to trace any transaction on Ethereum.)
What’s more, Russian oligarchs and companies would be unable to move their money around because of a lack of liquidity in the crypto market compared to the global currency market. According to Ayyar, “Liquidity in crypto is still a fraction of the global currency market, and hence moving large amounts of money using crypto is difficult.”
Lastly, cryptocurrency exchanges will also be on high alert. Many have already been ordered to and begun to freeze the assets of Russian users on their platforms. These include Kraken, Coinbase and Binance. Those same exchanges, however, have refused outright bans for Russian users.
Coin Clarity’s Recommendation
As the acceptance of cryptocurrency continues to grow and more people begin to convert the benefits of this disruptive technology, it’s clear that it can be put to incredible use. This terrible situation in Ukraine has demonstrated that crypto can be used for humanitarian causes, similar to how fiat has been used in the past.
If you are not directly involved in the conflict and are backing the defending nation, the best thing you can do is to make a donation to groups like Come Back Alive or the Ukrainian government (if you are able to) and follow the news to stay informed.
Over the next while, Coin Clarity will be publishing a number of articles discussing the role of cryptocurrency in the Russia-Ukraine war. Apart from this blog post, feel free to read our piece about how the conflict will affect your portfolio. If you’d like regular updates on the situation in Ukraine, check out our recent crypto timeline.
As always, this still remains a volatile period. If you’re concerned about safety and security, start investing through centralized exchanges like Binance (Binance US), Gate.io, Gemini, Coinbase, and Kraken. These are some of the best exchanges both in terms of service and selection of popular cryptocurrencies. This makes them an excellent choice to reduce your risk.