Two days after Russia invaded Ukraine, the Ukrainian government tweeted out its wallet address in an effort to solicit cryptocurrency donations in the forms of Bitcoin, Ethereum and USDT. Since then, more than $54 million worth of cryptocurrency donations have gone to the Ukrainian government and Come Back Alive, an NGO that finances Ukrainian military support, according to CNBC. 

But this is not Ukraine’s first encounter with crypto. Since last summer, Ukraine has postured itself as the ultimate destination for entrepreneurs and crypto-enthusiasts in search of low taxes and minimum paperwork. 

“The big idea is to become one of the top jurisdictions in the world for crypto companies,” said Alexander Bornyakov, deputy minister at the two-year old Ministry of Digital Transformation, to the New York Times. “We believe this is the new economy, this is the future and we believe this is something that is going to boost our economy.” 

As cryptocurrency contributions continue to flow in, many question how this major international conflict and Ukraine’s role in the tech ecosystem will affect the future landscape of cryptocurrency. 

Ukraine: A Crypto Utopia

The Ukrainian population contributes to one of the largest user bases of cryptocurrency in the world, with around $150 million in daily volume transactions and ranking fourth in the Global Crypto Adoption Index compiled by data firm Chainalysis. In fact, Ukraine has long been fertile ground for crypto adoption, fueled by the public’s lack of trust for the Ukrainian banking system which suffered severe corruption and economic fallout. The looming (and now very real) threats of a Russo-Ukrainian war also made Ukraine’s stock market fragile, putting foreign markets out of reach for many Ukrainians. 

The Ukrainian government’s recent advocacy for pro-crypto legislation has signaled Ukraine’s public sentiment for embracing the future of the industry. By legalizing Bitcoin last September, Bornyakov hoped that “the adoption of specialized legislation is going to stimulate the attraction of foreign exchanges to the Ukrainian market.” Earlier this year, Ukrainian President Volodymyr Zelensky also announced the launch of Diia City, a special economic zone providing a new legal and tax framework for IT companies (Bornyakov recently announced halts in its development due to the war). 

“The nations that offer good conditions for crypto businesses with strong consumer protection and risk management still have time to grab a piece of that global market,” said Oleksiy Feshchenko, an adviser on anti-money-laundering and counterterrorism financing (AML/CFT) at the United Nations Office for Drugs and Crime, which is also helping Ukraine to draft the crypto regulation.

The Global Implications 

More than ever, countries like Ukraine enable cryptocurrency to have a mainstream effect in global financial systems—this, however, also makes it inevitable for cryptocurrency to have a mainstream effect in international conflict. 

“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,” said to CNBC by Tom Robinson, the chief scientist at blockchain analytics firm Elliptic. 

Yet, many public figures such as Elizabeth Warren (D., Mass.) and Christine Lagarde, president of the European Central Bank (ECB), have called on lawmakers to implement a regulatory framework on digital assets, according to Cointelegraph. At the same time, a sleuth of crypto companies are circumventing the libertarian ethos that has long followed cryptocurrency by complying with sanctions.

Satoshi Labs, creators of Bitcoin hardware wallet Trezor, issued a statement that the company has “halted shipments immediately after the imposition of sanctions,” according to NBC. 

CEO of cryptocurrency exchange Coinbase, Brian Armstrong, likewise tweeted “every US company has to follow the law—it doesn’t matter if your company handles dollars, crypto, gold, real estate or even non financial assets. Sanctions laws apply to all US people and businesses”

Front and Center

The onset of the war in Ukraine spotlighted the tangible influence cryptocurrency has in global economics—for better or for worse. Although crypto has a history of being involved with major conflicts around the world, Ukraine’s recent focus on crypto crowdfunds and donations will undoubtedly trigger regulation concerns in the unforeseeable future.

ABOUT THE WRITER 

Ivy Tsang is a Tech Innovation Fellow at Identity Review from the University of Southern California, where she explores the intersections between the Arts, Technology and Business of Innovation. 

Contact Ivy at ivy@identityreview.com. 

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