Bitcoin, Ethereum & Co: What role does crypto play in the war?

Role of crypto currency in war - Source: Pexels
Role of crypto currency in war - Source: Pexels

However, there is the worry that Russia may use digital currency to evade Western sanctions. But it isn’t that simple.

States have historically relied on more or less voluntary donations to fund their conflicts. For example, via special levies or with interest-bearing war bonds. In this regard, Ukraine’s request two days after Russia’s strike is not exceptional; after all, would the government not expressly request cryptocurrencies?

“Reminder: Ethereum is neutral. I’m not,” Shortly after Russia’s invasion of Ukraine began, Vitalik Buterin tweeted. Buterin was born in Russia, raised in Canada, and is widely regarded as the brains of Ethereum. On Twitter, the software developer slammed Russian aggression and urged his 3.4 million Twitter followers to help Ukraine by donating cryptocurrency as part of the #Unchain Ukraine campaign.

“Nevertheless, I wouldn’t talk about a crypto war, but rather a protective shield for people,” According to Alex Gladstein of the Human Rights Foundation, a New York-based human rights group. He was instrumental in organizing the appeal for donations for Ukraine, which was successful in raising about $60 million in various cryptocurrencies for the war chest. “The Ukrainian government used the money to buy military equipment to defend the country,” explains Gladstein. But that’s not all: “Crypto-technology also provides peaceful humanitarian aid to hundreds of thousands of people who have fled, been displaced or are suffering in dire economic conditions.” There are special funds to help civilians escape and provide them with food and fuel.

30 million in crypto donations for Ukraine

Through #Unchain Ukraine alone, 1.4 million euros have been raised thus far. However, the Ukrainian government has requested that cryptocurrency be given to it. According to reports, a total of USD 30 million in cryptocurrency has already come to Ukraine through various efforts.

Can Russia bypass the sanctions with Bitcoin?

However, cryptocurrencies aren’t only a talking topic these days because they may be used to make donations to Ukraine. Fears have been voiced time and time again that Russia may utilize cryptocurrency to get over the sanctions imposed by the West in reaction to the aggression conflict. But to our knowledge, this will prove to be difficult because of the amount size. The fact that all transactions are visible on the blockchain makes it very hard to move billions in funds. There will be massive slippage and people using block explorer will be able to see it.

But, as Hanna Halaburda, a professor of business technology at New York University, points out, the bright new crypto world has its drawbacks. “Even before the Ukraine war, cryptocurrencies were used for good and bad things because they circumvent state control and regulation,” says the scientist. “And in this conflict, it is shown again very clearly: You can do better and worse things with crypto.”Because cryptocurrencies are also used in Russia – there to circumvent the drastic sanctions of the West. With the invasion of Ukraine, more rubles have been exchanged for Bitcoin than ever before. “Let’s take the oligarchs: they can exchange money for cryptocurrencies to avoid sanctions,” says Halaburda. You can hardly prevent that. First of all, you would need the addresses of the virtual wallets of these oligarchs. “Then you would – secondly – have to block them in all trading platforms. And thirdly, there are not only bitcoins; there are cryptocurrencies that are so protected that a blacklist is useless.”

This brings us to the question, is Bitcoin really anonymous?

Crypto platforms: Unblock Russian addresses

The responses of major cryptocurrency exchanges to a request from Ukrainian Deputy Prime Minister Mykhailo Fedorov fueled such suspicions. He requested that Russian users’ addresses be blocked on Binance, Coinbase, Kraken, and other exchanges. The crypto exchanges, on the other hand, brushed it off. On Twitter, Kraken CEO Jesse Powell mentioned, among other things, the crypto community’s libertarian history, which such legislation would violate. Similar declarations were issued by the other major platforms.

The concern is whether cryptocurrencies can truly be used by the Russian government to promote its own economy on a big scale, such as to compensate for its exclusion from the Swift system. Finally, there are certain grounds against the Russian government just doing its operations in Bitcoin from now on. Experts remind out that the crypto world is now far more controlled than is often assumed, and that cryptocurrency transactions can be traced in real-time using the blockchain. And the kind of amount we are talking about would be way too big and seen by anyone who has an internet connection and reads Blockchain explorer. Therefore, to our knowledge, Oligarchs and the Russian government would not be able to use crypto to evade sanctions. 

Bitcoin & Ethereum rise in price

In the short run, Russian businesses will find it difficult to pay for products and services using Bitcoin and other cryptocurrencies since they must first be able to retain and receive bitcoin. Nonetheless, since Russia’s decision to abandon the SWIFT system, the price of Bitcoin and other cryptocurrencies has surged significantly. Bitcoin’s market capitalization has now surpassed that of the Russian ruble.

Summary – What role does crypto play in war?

  • On Twitter, the software developer slammed Russian aggression and urged his 3.4 million Twitter followers to help Ukraine by donating cryptocurrency as part of the #Unchain Ukraine campaign.
  • Experts remind out that the crypto world is now far more controlled than is often assumed, and that cryptocurrency transactions can be traced in real-time using the blockchain.
  • The amount of funds that Russian oligarchs want to move around is too big to not be easily spotted using Blockchain explorers
  • In the short run, Russian businesses will find it difficult to pay for products and services using Bitcoin and other cryptocurrencies since they must first be able to retain and receive bitcoin.
  • Since Russia’s decision to abandon the SWIFT system, the price of Bitcoin and other cryptocurrencies has surged significantly.
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