With the war clouds brewing over Ukraine, why are cryptocurrencies now a hot topic, and what effect is the nascent crypto sector having on its reputation?
What amount of crypto has been raised?
In response to social media appeals, Ukraine has raised over $8 million in cryptocurrency since the war with Russia started. Following Ukraine's official Twitter account's appeal for cryptocurrency donations and posting digital wallet addresses for tokens including bitcoin and ether, donations have poured in from across the globe in the form of bitcoin and other digital assets.
Mykhailo Fedorov, Ukrainian vice premier, distributed wallet addresses on Twitter to the public on February 26 to ask them to "stand with the people of Ukraine". By 4 PM on February 27, the wallet addresses had received "crypto worth $7.9 million across nearly 11,500 donations." Elliptic, a London-based company that tracks digital currencies on blockchains, monitored this activity.
As of the end of February, cryptocurrency analysts estimate that the country has already received more than $11 million from anonymous Bitcoin donations.
In this cryptocurrency crowdfunding campaign, Ukraine has requested direct donations from the public using digital tokens for the first time ever. According to reports, Kyiv has not yet identified how these funds will be used. In January, Russia started positioning troops. along the Ukraine border, these groups have received larger donations, including some that "have provided equipment to government forces.".
Crypto donations, such as those made here on this page, illustrate how donations made to large charities, like the Red Cross, in these times of crisis are now being sent to smaller charities, such as crypto-based ones.
Donating in cryptocurrency has many benefits.
The United States and the European Union send more money in aid packages to Ukraine in fiat money than in cryptocurrency, but the latter allows individuals to participate.
The Giving Block, a US crypto charity, told AFP that cryptocurrency donations have the potential to attract "young donors" looking to contribute to various causes.
Furthermore, crypto donations to Ukraine are of value because they are less susceptible to macroeconomic or geopolitical factors. Chobanian points to the depreciating value of the Ukrainian hryvnia as a consequence of inflation.
Using cryptocurrencies for donations has the added benefit of speeding up the transfer process. Bank wires can take up to 24 hours to clear between countries, but cryptocurrency transfers are usually much faster.
What are the disadvantages?
In spite of its success, crypto did not have an easy trip in the Ukrainian war effort.
As a symbolic gesture for Kyiv's cause, the deputy minister for digital transformation attempted to issue Ukraine's own cryptocurrency in the early days of the conflict. However, the project was ultimately scrapped.
Even worse, people have taken advantage of the opportunity to sell fake versions of the planned government-issued cryptocurrency.
Chobanian, who now works closely with the ministry, said there was a lack of communication within the government.
As a result, Ukraine's shadow economy has become reliant on cryptocurrencies - used to commit crimes online, for tax avoidance, and to transfer money.