The current conflict in Ukraine has become a stress test for cryptocurrencies in many tangible ways. Digital assets have emerged as an effective means of directly supporting humanitarian efforts, and the cryptocurrency industry, despite enormous pressure, has largely proven to be a mature community, willing to comply with international policies without compromising the fundamental principles of decentralization.
But there is another vital role that cryptocurrencies have played during these tragic events: It is becoming increasingly familiar to those who have found themselves cut off from once-infallible payment systems.
Traditional financial infrastructures often do not function well during military confrontations and humanitarian crises. From hyperinflation and cash shortages to the destruction of ATMs, crises can disrupt the banking system’s ability to function and threaten the money supply for millions of ordinary people.
Cointelegraph spoke to some of the people who experienced these disruptions firsthand during the first days and weeks of the war. Some of them didn’t know much about crypto and had to learn quickly, while others were lucky enough to have had some experience with digital assets that they could draw on.
Some of these people are from Ukraine and have directly experienced the struggles of the war, while others are from Russia and had to leave the country when their ordinary lives came crashing down overnight. Their stories reveal that when the world collapses, it is ordinary people for whom cryptocurrencies provide the last line of support, not corrupt elites.
“Cryptocurrencies were originally created so that no government or individual could control them”
Viktoria Fox is a Ukrainian-American businesswoman who is the founder and CEO of Polaris Capital, a cryptocurrency mining company. Her parents moved from Ukraine to the United States during the post-Soviet turmoil of the 1990s. When the war broke out on February 24, her American family began receiving phone calls from her relatives in Ukraine. Faced with the advance of Russian troops in the country, the National Bank of Ukraine immediately stopped the circulation of all securities and limited cash withdrawals, creating a frenzy throughout the country.
Although the central bank claimed that the banking and financial systems remained “resilient” after the Russian invasion, Fox’s relatives told a different story from the ground:
“What I have been told is that the banks are closed and all the ATMs are out of money. After two weeks of war, my relatives, like most families, are completely out of cash.”
Since then, Fox has been sending them Bitcoin (BTC), which began to function as a cash substitute for vendors and fellow citizens, a means to pay for almost anything from food to taxis. Viktoria’s uncle used Bitcoin to compensate a driver who traveled six hours to take him from Kharkiv to the western part of the country.
In Fox’s experience, most Ukrainians prefer to transact through established global exchanges such as Coinbase and Binance, although some trust Ukrainian exchanges as well.
“I think it’s important to remember that cryptocurrencies, especially Bitcoin, were originally created so that no government or individual could control them,” Fox noted. “While it would be tempting to punish ‘bad’ Russians and reward innocent Ukrainian civilians, defeats the entire purpose of a decentralized currency or asset.” She does not believe that tightening government control over cryptocurrencies will help ordinary people during this or any future war.
“For me, as an anarchist, it was a matter of ideological choice, not comfort”
Until a few weeks ago, “Andrey” lived in the Russian city of St. Petersburg, where he was born. Andrey is a front-end developer and has some professional experience with blockchain platforms. “I probably couldn’t write a smart contract, but I sure know how to use cryptocurrencies in daily financial operations,” he said. “I have experience withdrawing USDT here and there, and I never did it through bank cards. For me, as an anarchist, it was a matter of ideological choice, not comfort.”
When Andrey headed to Berlin on the fourth day of the war, his entire belongings consisted of a laptop, a couple of T-shirts, and a hardware wallet containing some hard-earned stablecoins:
“I had to use them to buy plane tickets to travel within Europe. The last thing I managed to do with my Visa card was rent a flat on Airbnb for two weeks. I was lucky to have a lot of friends in Europe, and now they help me to pay with cards when necessary. I only send them the coins”.
In the long term, Andrey admitted that he still needs fiat to buy food and other necessities. He has yet to learn the peer-to-peer withdrawal tools available in Europe. Still, he considers the decision to purchase a physical cryptocurrency wallet to be one of the smartest decisions of his life. “Not that I was preparing for something like that, but, you know, when you live under authoritarianism, it’s better to be independent from local banks.”
Andrey admitted that withdrawing crypto in a new jurisdiction could also be a big problem. He said:
“Despite my general knowledge of the industry, I am currently in a difficult position. In Germany there are very strict requirements for cash withdrawal, and I am still investigating how to do it.”
It’s not just about personal needs. Andrey is a Russian citizen whose father was born and raised in southern Ukraine. He has no legal way to donate money to support the relief effort for Ukrainian civilians: such an act could be considered a criminal offense or even high treason by the government. Andrew noted:
“Like many others in Russia, I have friends in the Ukraine. Some of them are now in kyiv, sleeping in bomb shelters under artillery fire. My problems are nothing compared to theirs. To help them, I had to find someone about the land that will accept to exchange my USDT for hryvnias [la moneda ucraniana]. After making sure that my friends’ bank cards were working, I took this opportunity. The sum wasn’t huge, but I hope it was at least a help.”
“We could not receive international transfers to Ukrainian accounts”
Anna Shakola, a native of kyiv, started working as an NFT project manager at Cointelegraph in November 2021, several months before the war broke out. She had not used cryptocurrencies as a payment method until the crisis began: “Honestly, she had never paid with cryptocurrencies, except for NFT transactions. She only used these assets as an investment tool.”
Shakola had to learn fast, as during the first three weeks of the war, the fiat financial system was partially frozen: “We couldn’t receive international transfers to Ukrainian accounts, and we also had some problems with domestic fiat transfers.” After getting used to doing everyday transactions with digital currencies, he was introduced to Unchain, a charity project founded by Ukrainian blockchain activists.
Unchain began funneling donations to Ukrainian civilians on Feb. 27, after a network of local cryptocurrency exchanges endorsed the initiative. The next step was to issue virtual debit gift cards known as “Help Cards” in cooperation with the kyiv-based Unex bank and Weld Money. The cards are designed to help families – mothers and children – who don’t have time to learn how to use cryptocurrencies in the midst of war. Unchain accepts donations in cryptocurrencies and converts them into hryvnias for the recipient. It plans to finance up to 10,000 aid cards.
The war has undoubtedly shaken the world economic order, and has also become a profound stress test for the cryptocurrency industry. Despite suspicions that digital assets could undermine the international sanctions regime, they have recently emerged as a resilient and flexible payment system with the potential to help millions of people through their toughest day.
It is no accident that the Ukrainian government has championed measures to develop its digital economy after the war. On March 16, Ukrainian President Volodymyr Zelenskyy signed a law to build a legal framework for the country to establish a regulated cryptocurrency market. Given the need to rebuild the country after hostilities end, the nation’s experience with cryptocurrencies will likely be critical to developing a prosperous digital economy.
Clarification: The information and/or opinions expressed in this article do not necessarily represent the views or editorial line of Cointelegraph. The information set forth herein should not be taken as financial advice or investment recommendation. All investment and commercial movement involve risks and it is the responsibility of each person to do their due research before making an investment decision.