Are we living through the world’s first Crypto War?
News broke on Thursday the 24th of February 2022, that Russia had launched a large-scale invasion of neighbouring country Ukraine, marking a significant progression in the mounting conflict.
Soon, reports were flooding in about the role crypto is playing in aiding both sides of the conflict, begging the question… Is this the world’s first Crypto war? For the first time in history, we are seeing crypto play a major role in how nations and individuals affected by this situation navigate their way through it.
Firstly, there are fears that Russia could use cryptocurrency to avoid the effects of Western sanctions designed to punish through restrictions on finances. According to Tom Robinson, chief scientist and co-founder at the crypto analytics firm Elliptic.
“Because there is no central controller who can impose their morals on its user, crypto can be used to crowdfund for the Ukrainian army or help Russia evade sanctions,” …No one can really prevent it from being used in either way.”
It is also being used to fund the Ukrainian military.
In less than 24 hours people donated over $400,000 in crypto to support the Ukrainian army.
Come Back Alive is the Ukrainian nongovernmental organization behind the fundraiser. Established in 2014, when armed conflict broke out between Ukraine and Russian-backed separatists, they claim to use funds for armour and medical equipment.
The organisation originally launched their fundraiser on Patreon but it was promptly removed from the site, with Patreon releasing a statement saying: “We don’t allow Patreon to be used for funding weapons or military activity. It is a violation of our policies…”.
The NGO’s decision to enable crypto donations, resulted in them achieving $400,000 worth of Bitcoin in just one day with the average amount donated sitting at $1,000 to $2,000.
Prominent members of the crypto community rallied their audiences to donate what they could to help. Within 4 days of the invasion over $4million dollars worth of bitcoin had been donated.
Additionally, Forbes reported that other non-governmental and volunteer organisations in Ukraine had managed to raise over $4 million worth of crypto donations in less than a week after the invasion began.
The Russian government, on the other hand, is not crypto shy, on the contrary, they are in fact one of the most active governments when it comes to crypto. They have even proposed legislation to recognize Bitcoin mining as a “commercial activity” and intend to bring cryptocurrencies into the same regulatory framework as “foreign currencies”.
Russia is the third-biggest Bitcoin mining nation second only to Kazakhstan and the United States, and their invasion of Ukraine is reported to have had little to no impact on the country’s Bitcoin mining.
Russia’s comfort with crypto could indicate that its wealthiest citizens and nationals abroad could be using crypto to circumvent the consequences and impact of global sanctions that will be placed on Russian businesses and banks.
There are also reports of Ukrainian citizens relying on crypto as ATMs are emptied in the panic to escape the conflict. In one case a Danish reporter used Bitcoin to buy a used car to leave the city.
And, this wouldn’t be the first time crypto has been used to fund and or navigate conflict, it was instrumental in the Canadian trucker protests which were formed in opposition to nationwide vaccination mandates placed on truckers re-entering Canada from the US. Despite the government blocking the 10 million dollars on Gofundme they still managed to raise 700k in bitcoins. Even gaining the support of Elon Musk who tweeted his love for Canadian Truckers. Whilst this win was celebrated by some in the online crypto community many who lived in Canada were not pleased with a disruptive minority fueling chaos especially when their funds were coming from sources outside of Canada itself and therefore not impacted by it directly.
Despite the apparent clamour to leverage crypto to fund and manage large scale conflicts, experts warn that it may not be as effective a solution as it seems.
According to Nick Furneaux, MD of investigative firm CSITech and author of the book “Investigating Cryptocurrencies. ”The problem is the off-ramp. You could theoretically move all the payments you want, but until you can buy a burger down the street, there’s not much you can do with the money,”.
But as more businesses engage with the crypto space the gap is certainly closing. Coinbase and Crypto.com have both launched their own Visa debit cards which allow users to use their acquired cryptocurrencies as payment methods. Both are integrated with Apple Pay and Google Pay.
Typically war creates a lot of economic difficulty with taxes and inflation rising and consumption and investments decreasing. Two of the ways to remedy this is 1, job creation and 2, heightened consumer demand. Advances in Web 3.0 could fuel both of these.
So perhaps, life in a post crypto war era will see us relying more heavily on Web 3 technology and decentralised finance to compete with and defend against those already using these systems to evade the restrictions and structures that used to apply to us all.