The cryptocurrency war: The underground but giant conflict between Ukraine and Russia

The cryptocurrency war: The underground but giant conflict between Ukraine and Russia

Now cryptocurrencies - we will call them crypto - completely change the way in which transactions are made, but also the way in which money is traded and exists.

They have basically changed the world economy. And this could not be seen better than the war between Ukraine and Russia. But which of the two warriors are the cryptos with? Or, after all, which of the two do they favor?

The front pages of the Sunday newspapers of March 20 (pics)

The answer is complex, as is the conflict itself, as our world at large.

To begin with, Russia and Ukraine are the third and fourth countries in the world in crypto transactions. And that no matter how much the planet wants to squeeze the Russians financially and cut them off from any transaction, it will make about a hole in the water as long as there are cryptos.

Welcome to the very obvious world of crypto

Cryptocurrencies have become very common and are part of the global financial system, so they could not be part of a conflict. Millions of dollars in crypto have flowed in from various sources in Ukraine in order to strengthen the country's army and beyond.

The Ukrainian government has already raised at least $ 15 million in crypto from donations, and many Ukrainians have turned to crypto as the country's banking system collapses.

In a situation of absolute and generalized chaos, the first thing that loses its credibility is the traditional banks. It is therefore very easy and useful for people to be able to turn to a relatively anonymous system of financial transactions, which is not mediated by governments and restrictions.

Crypto has many advantages: No one can "freeze" it, no one can ban it and it is very difficult to find the person who trades in it. Perfect? Of course.

And this enables it to become just as much a humanitarian tool or a rinsing tool. We all now understand that the problem is never the tool itself, but how you use it.

Whether the use of crypto at this stage can effectively help the purposes of humanitarian organizations is debatable: It is a tool that requires knowledge and access to advanced technology and certainly can not be used by people who run in panic to leave their homes on the front lines of the war.

On the other hand, the exact same features that make crypto attractive to those under siege make it just as attractive to those who besiege them.

It is clear that cryptocurrencies can be - and will be - used as a means of circumventing the West's most important weapon against Russia, financial constraints.

There is also the issue, of course, that, unlike traditional Banks, crypto is circulated on the internet and maybe anonymous, but it is not vulnerable to cyber-attacks.

Generally speaking, cryptocurrencies are still quite vulnerable. They are far removed from the "virtual gold" with which many liken them and have lost much of their value in recent times, showing that they provide no security, contrary to what their fanatical proponents say.

What does not provide security, however, can's make you lose half your fortune overnight or even make you -relatively- rich ...

But let's try to see how the crypto-economy affects the two warring parties, but also how the global economy is changing.

Ukraine: Crypto in the "wallets" of refugees

Many Ukrainians who left their country took their cryptos with them, which they hope they will be able to convert into some official currency when they arrive in a safe place.

Even more, people seem to be turning to crypto as a way to safeguard their fortunes as the country's economy collapses: Ukraine's central bank has already suspended all electronic transactions and barred Ukrainian citizens from saving foreign currency. Last Friday, trading on the Ukrainian crypto-platform Kuna surpassed all previous levels and reached unprecedented levels.

People queue in front of an ATM in Mariupol, Ukraine, on February 24 in order to get money @ AR RIOTO

Of course, in the midst of a state of war, it is not exactly easy to trade crypto, as you initially need internet, which is not a given that you will have. Also, the use of crypto needs an elementary education that people there may not be able to do at the moment. There are thousands of cryptocurrencies and not all of them work the same way.

The difficulties do not stop there: Even the richest Ukrainians report that they have difficulty finding and buying Tether, a cryptocurrency that is "locked-in" with the dollar. Finally, if you want to convert your assets into crypto, the rest of the financial system must work, that is, where you have it.

And even if you manage to do all this, you will somehow have to leave the country, which, no, is not so easy. And to hope that when you get to your destination, you will not have lost half your money in some internet black hole.

In conclusion, cryptocurrencies are more useful these days for those who already have them. And there are millions in Ukraine, as in recent years the country has furiously promoted its own cryptocurrency industry.

Exactly one year ago, the Ukrainian Parliament passed a series of laws to formalize the use of crypto and today the country is fourth in the world in the use of cryptocurrencies, according to the company Chainalysis.

That is why many NGOs operating in the country receive daily donations in crypto, having opened to the public the email addresses of their crypto-wallets.

Those who accept crypto donations do not include the Ukrainian Ministry of Defense and the National Bank of Ukraine. On the contrary, the Ukrainian government accepts and says so, it also announced in a post on Twitter.

What are the Russians doing?

Let's go across. Because, as we said before, everything has two sides. The dark and the light, or upside down, depending on where you stand.

The Americans, who are not yesterday, knew the issues before the Russians even invaded Ukraine. They had the experience of Iran, which had used bitcoin to circumvent the embargoes. Why not Russia do the same?

And not only does it do it, but it does it better.

The New York Times published a report according to which the Russian government is developing the "virtual ruble" and has been working feverishly for a long time, making tools that will help to hide electronic transactions. After all, it would at least be naive to believe that Russia did not know what was coming to it and was not prepared.

Simply put, what is happening is that as long as everyone in the natural world imposes measures and sanctions on Russia and no one formally deals with it, cryptocurrencies will make all these efforts useless.

Mikhail Fedorov, Ukraine's deputy prime minister, has, of course, called on all relevant platforms to block Russian-affiliated addresses. But the Biden government is also working on various plans on how to freeze the assets of Russian oligarchs who are in crypto. Going a step further, he "urged" trading platforms to block their Russian users.

Beware: The keyword is prompted. Because only he can do that. Nothing else.

Russia is the third-largest crypto-user in the world, one place ahead of Ukraine. It is a fact that a possible exclusion from the use of crypto would deal a huge blow to its economy. But it is unlikely that such a thing could happen.

As the ruble collapses, more and more Russians are looking for alternative ways to secure their assets @ AR RIOTO

First, it is not a prerequisite for all platforms for the trader to give his real identity, and therefore his place of origin and residence. Second, most platforms are not legally required to comply with restrictions, as they are not US or European companies.

Third and most importantly, they do not want to comply. Many have already responded negatively to relevant requests from the US and the EU. What do they care about who is right and who is wrong? They want to make money.

Cryptos are known to be used in all kinds of illegal transactions, such as money laundering, drug trafficking, drug money, human trafficking money, kidnappings, cyber-attacks, all these nice things. And too many of these transactions have been linked in one way or another to Russia.

The Ukrainian government itself was targeted by hackers a few weeks ago, who demanded payment in bitcoin in order not to corrupt data on government servers. We have no idea where they came from. Suspicions yes, certainties no.

This, of course, does not mean that cryptocurrencies are to blame for all this. In the final analysis, both the euros and the dollars, which are very official and obvious money, are used for many good purposes, but also for many very dark ones.

How crypto is changing the global economy

Last week, as soon as Russia invaded Ukraine, bitcoin proved to be no different from the rest of the financial system. He made a spectacular dive, along with the stock markets, and as soon as they started to recover, that too went up.

This has shown that cryptocurrencies do not protect investors from microeconomic conditions. On the other hand, they remain a relatively safe alternative: What should the Ukrainian do in the current circumstances? To invest in what? On the Dissolved Stock Exchange? In the non-existent Banks? To buy a house? And take it with him after leaving?

And it's not just Ukraine. In Turkey, a huge number of investors and ordinary people turned to the big cryptos a few months ago, when the Turkish pound became scrap paper, much more volatile than bitcoin.

The Ukraine-Russia conflict is not the first time people have turned to crypto because of a crisis.

It is, however, the first time that the crypto-economy has come to the fore so much and is playing such a big role. So much so that some call the Russian invasion "World War I crypto-war."

The only thing that is certain is that now the cryptocurrencies are here to stay and regardless of the individual role they will play for or against one or the other country, they do exactly what they promised: They bypass the traditional economic system.