Russian defaults and the use of cryptocurrencies during the war

What Happens by Russian Default

Russia is facing a serious foreign currency shortage due to severe financial sanctions from developed countries. The freeze on central banks' foreign exchange reserves, especially in major countries, was probably a big shock.
Even though the Russian government's finances have not collapsed, a special form of default (default) is approaching, in which the shortage of foreign currency caused by sanctions makes it impossible to pay principal and interest on foreign currency-denominated government bonds.


In fact, defaults could cost foreign investors, but the impact on financial markets in developed countries would not be significant. Financial markets have already factored in the possibility of default accordingly. It is unlikely that it will have the same impact on global financial markets as Russia's default in 1998 (column " Russia's approaching default. Differences from the 1998 Russian crisis ", March 4, 2022).

However, defaults are likely to further reduce the ruble's creditworthiness and accelerate the ruble's depreciation. In that case, rising import prices will put pressure on the lives of the Russian people. Russians are also trying to withdraw foreign currency deposits from banks before restrictions are imposed due to a shortage of foreign currency. Furthermore, it seems that the ruble, whose value is steadily declining, is being given up and the movement to purchase virtual currency (cryptocurrency) is intensifying.

Following the SWIFT (International Interbank Communication Association) sanctions by developed countries and the freeze on foreign currency reserves, Russia will seek international payments using its own central bank digital currency and will use China's digital yuan for international payments.

It is expected to aim to avoid sanctions in the future by doing so (column " Settlement in virtual currency pioneered by sanctions against Russia and battle for supremacy of new international settlement using central bank digital currency ", March 2022 Day).

On the other hand, it is thought that the people are strengthening their stance to protect their assets by converting rubles into virtual currencies. This movement to increase demand for virtual currencies is thought to be one of the reasons for the soaring Bitcoin prices since the end of February.

The widespread use of cryptocurrencies in wartime Ukraine

Cryptocurrency donations are used to procure military equipment and medical supplies

By the way, the increase in demand and expansion of the use of virtual currencies are also seen in Ukraine, which is under attack from Russia. Due to the invasion of Russia, access to foreign currencies has become difficult, so Ukrainian citizens are trying to buy tether, which is a virtual currency linked to the dollar, a stable coin, along with Bitcoin. 

It has spread. Following the issuance of a strict decree on February 24 in Ukraine, the central bank has taken regulatory measures such as restricting withdrawals from automated teller machines (ATMs), restricting the use of official e-commerce, and prohibiting the issuance of foreign currency to the general public. I took it.
Cryptocurrencies, including tethers, are becoming more popular in Turkey and Nigeria, where citizens are worried about the stability of local currencies and access to foreign currencies.

In Ukraine, unlike Russia, the government is also actively using cryptocurrencies. It is for the procurement of military equipment and medical supplies necessary for conducting the war. According to cryptocurrency analysis company Elliptic, since the invasion of Ukraine by Russia began, the Ukrainian government and private support groups have received more than 89,000 donations, worth about $ 51 million (about 5.9 billion yen).


Is said to have gathered. It is used to procure military equipment and medical supplies. It seems that the number of cases where activists and terrorist organizations use virtual currency as a means of raising funds is increasing in the world, but it is rare for the government to use it.

In this way, it can be said that it has been proved this time that even if the international payment by banks is hindered, it is possible to directly raise funds from individuals all over the world for humanitarian assistance and raising war expenses using virtual currency. 

In developed countries, it cannot be assumed that virtual currencies with large price fluctuations will be widely used as a means of remittance, but countries in wartime such as Ukraine will use virtual currencies as a means of accepting donations from inside and outside the country. Will clearly point to one of the potentials of cryptocurrencies.
"Bitcoin Price Jumps as Demand in Ukraine and Russia Booms", Wall Street Journal, March 2, 2022