Cryptocurrencies in Ukraine are playing an unprecedented role, allowing the government to raise millions of dollars to fund its response to the Russian invasion.
From the first hours of the conflict, the Ukrainian government opened addresses and wallets for cryptocurrencies, allowing them to receive these decentralized currencies directly.
Anyone with encrypted operations can send them to these addresses.
Cryptocurrencies of all kinds, including Bitcoin, Ethereum, and Tether, denominated in dollars, are pouring into the government.
The Ukrainian government and the “Cryptocurrency Fund of Ukraine” created by the main Ukrainian platform “Kona” for the sector and which was combined with the state fund, have raised more than one hundred million dollars.
“We are still collecting cryptocurrencies and spending them to buy food rations” for soldiers and “bulletproof vests and helmets,” KUNA founder and CEO Michael Choubanian, 37, told AFP.
Choubanyan became exclusively interested in collecting cryptocurrency donations for his government.
Benefits of donating cryptocurrency
The sums raised in cryptocurrencies are small compared to the billions of dollars in aid approved by the United States, the European Union and major international organizations, but it allows individuals to contribute to the financing.
The American NGO “The Giving Block”, which collects cryptocurrencies around the world in order to send them to Ukraine, considered it “an option that younger individuals are increasingly resorting to to support various causes.”
On the other hand, Ukrainians have turned to these decentralized currencies to protect themselves from the devaluation of their currency.
So far, the Ukrainian Central Bank has succeeded in stopping the collapse of the national currency, but the repercussions of the invasion may lose the value of the Ukrainian hryvnia.
By using dollar-denominated cryptocurrencies, donors avoid exchange market volatility as much as possible.
One of the advantages of donating cryptocurrency is the speed of transfers. While a bank transfer between two countries can take up to 24 hours to process, a cryptocurrency transfer usually takes less than an hour.
Disadvantages
In a sector that is still being built, crypto donation is not without hurdles.
Ukraine’s Minister of Digital Industry wanted to reward donors with a token cryptocurrency created for the occasion, but then gave up.
Worse, unknown persons had deliberately placed a counterfeit copy of this Ukrainian encrypted currency, in an effort to collect part of the sums allocated for military purposes.
“There was a miscommunication” within the government, said Choubanian, who is now coordinating closely with the ministry, recalling that “it was the first day of the war.”
On the other hand, encouraging the use of cryptocurrencies could, in the long run, turn against the government, by urging Ukrainians to use a parallel financial system.
According to the Chainalysis Center, remittances in Eastern Europe are directed especially to addresses outside the region, “which could indicate an illegal exit of funds”, for purposes that may include tax evasion.
repercussions
Despite the conflict, Chopinian is confident and says, “After our victory in the war, we will rebuild Ukraine through blockchain technology” for cryptocurrency exchange, referring to a data-collection mechanism that has the ability to constantly expand.
On Wednesday, Ukrainian President Volodymyr Zelensky signed a law to legalize cryptocurrencies that sets a legislative framework for platforms and users in a country where this sector until now constituted a parallel economy.
Beyond Ukraine’s borders, the conflict is forcing governments to develop and frame their concepts for cryptocurrency.
“We hope that this will lead to appropriate and effective regulatory policies,” Caroline Malcom, an expert at Chainalysis, told AFP.
In the United States, US President Joe Biden launched a project to issue a “digital dollar” and asked several federal agencies to prepare reports on the risks associated with cryptocurrencies and how to address them.