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Felicity Bradstock

Felicity Bradstock

Felicity Bradstock is a freelance writer specialising in Energy and Finance. She has a Master’s in International Development from the University of Birmingham, UK.

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The Geopolitical Impact Of Cryptocurrency

  • Ukrainian President Volodymyr Zelenskyy has made it legal for the central bank to issue a digital currency. 
  • According to a report by Elliptic, over $570,000 of cryptocurrency has flooded into voluntary organizations and NGOs in Ukraine.
  • Ukraine could quickly become a crypto superpower at the rate funds are flooding in.

People from around the world are sending bitcoin and other cryptocurrencies to finance Ukrainian forces against Russia as the country crowdfunds to support its war efforts. Having developed a burgeoning crypto market, Ukraine is now using its experience with digital currency to enhance its military and online capabilities.  According to a report by Elliptic, over $570,000 of cryptocurrency has flooded into voluntary organizations and NGOs in Ukraine to help provide the army with military equipment, medical supplies, and drones. In addition, funds are supporting the development of a facial recognition app to identify whether someone is a Russian mercenary or spy. The fact that crypto can be sent anonymously, without strict checks, makes it easier to transfer funds across borders.

Elliptic’s Chief Scientist Tom Robinson states, “Cryptocurrency is increasingly being used to crowdfund war, with the tacit approval of governments.” Demonstrating perhaps the first example of crypto being used in such away. 

Formal responses have already been made as the U.S., U.K. and other states have sent military equipment to Ukraine to help prepare it for a possible Russian invasion. However, voluntary forces have become an important part of Ukraine’s military efforts in recent years. 

Robinson explains the benefits of crypto over other types of currency in funding voluntary efforts, “Cryptocurrency is particularly suited to international fundraising because it doesn’t respect national boundaries and it’s censorship-resistant — there is no central authority that can block transactions, for example in response to sanctions.”

And Ukraine’s grassroots crypto activity is now being taken seriously at the national level. Ukrainian President Volodymyr Zelenskyy has made it legal for the central bank to issue a digital currency. He has also worked with the government to legalize and regulate cryptocurrency, making it easy for companies to trade in digital currencies.  

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Some groups fundraising cryptocurrency include Come Back Alive, an organization founded in 2014 that provides military equipment, training services and medical supplies. It began accepting crypto donations in 2018 and received around $200,000 in the second half of 2021. Come Back Alive told Reuters, “We have made a bitcoin wallet because people keep asking for it, and we want to give opportunities for everyone to support us comfortably.”

The organization Ukrainian Cyber Alliance has received a reported $100,000 to support its cyberattacks on Russian forces in recent years. And Myrotvorets Center, a controversial organization closely connected to the Ukrainian government, publishes personal information of enemies of the state.  

Ukraine could quickly become a crypto superpower at the rate funds are flooding in. Following the legalization of digital currencies in 2021, the low taxes and simple paperwork associated with the new payment method is attracting more individuals and businesses to crypto. In addition, it offers Ukraine the opportunity to establish itself as an Eastern European hub for innovation and development. It is already establishing a large pool of developers and being recognized for the programmers supporting the country’s digital transformation. 

Mykhailo Fedorov, Ukraine’s Vice Prime Minister of Digital Transformation stated of the move to legalize and regulate cryptocurrency, “The development of a new industry will allow attracting transparent investments and will strengthen the image of our country as a high-tech state.”

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Related: U.S. Gasoline Prices Soar To 2014 High

According to a scale established by data firm Chainalysis, Ukraine ranks fourth on the Global Crypto Adoption Index, with an estimated $8 billion in cryptocurrencies entering and leaving the country every year. This equates to around $150 million a day. Many Ukrainians have been drawn to crypto as a place to invest their money as there is no strong stock market alternative. 

The Ukrainian Digital Ministry is so confident about the country’s place in the international digital currency market that it has set the objective of doubling the percentage that tech contributes to the national GDP from 5 percent to 10 percent. It also expects to double the number of people employed in tech to 500,000.

And now new companies are cropping up to try their luck at the Ukrainian crypto market. Major cryptocurrency exchange Binance is preparing to launch a new crypto-payment card in Ukraine, which would place it as a dominant position. The company’s general manager Kirill Khomyakov stated, "Binance card is not yet available for Ukrainian users, but we are actively working on its launch. This is one of our top priorities for 2022."

Over the last year, Ukraine has worked hard to establish itself as a cryptocurrency hub thanks to the recent legalization and regulation measures taken surrounding digital currencies. It has been developing its pool of tech workers and expects to establish itself as a crypto hub in Europe in the coming years. However, cryptocurrencies have become even more vital to Ukraine’s economy in recent months as the threat of invasion from Russia has led individuals and companies from around the world to send funds to voluntary and government-associated groups to help them prepare. This could be the first example of cryptocurrency being used to support a war effort as well as to form an integral part of the national economy.

By Felicity Bradstock for Oilprice.com

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