The world economy has been facing diverse challenges from recession due to the COVID-19 pandemic; and now there is the Russia-Ukraine war. COVID-19 dealt a heavy blow to the world economy and many people lost their lives to the pandemic. The recent happenings in Russia-Ukraine are a bit different.

Cost of opportunity

This is not a case of pandemic or health related issues, but rather a border and political related matter. It is known that countries involved in a war take a hit. Besides people also lose their lives, and there are great costs to the economy, including destruction of property through bombing, uncertainty regarding the future of the country, increase in debt levels to finance the war and the huge opportunity cost (rather than building bombs and rebuilding destroyed towns, countries would have used the money to improve education or health care).

Note: As stated by NY Times, the opportunity cost of the Iraq war was estimated at $860 billion by end of 2009.

Cryptocurrencies have been on the headlines since Russia invaded Ukraine, and more awareness has been created freely due to the war between Russia and Ukraine. According to Noelle Acheson, head of Market Insights at New York based Genesis, this recent war has contributed to the narrative that bitcoin is not just a speculative asset, it is also a seizure-resistant, policy-independent, longer-term store of value.

Early adoption

Before the invasion of Ukraine, the Ukrainian government legalized cryptocurrency. Nothing was said about the move being linked to any military war threat, as there had been high tension at the Russia-Ukraine border for months. It’s worth noting that 272 of its 450 members in the Parliament members voted in favor of the legislation just a week before the invasion began.

After the Russian attacks, the official twitter handle of the Ukrainian government sought donations from everyone including those outside the country. Digital assets were received such as BTC, ETH, USDT (ERC-20), DOT among others.

Tweet from @Ukraine

“Stand with the people of Ukraine. Now accepting cryptocurrency donations. Bitcoin, Ethereum and USDT. BTC – 357a3So9CbsNfBBgFYACGvxxS6tMaDoa1P ETH and USDT (ERC-20) – 0x165CD37b4C644C2921454429E7F9358d18A45e14”

“The people of Ukraine are grateful for the support and donations from the global crypto community as we protect our freedom. We are now accepting Polkadot donations too: $DOT: 1x8aa2N2Ar9SQweJv9vsuZn3WYDHu7gMQu1RePjZuBe33Hv. More cryptocurrencies to be accepted soon.”

“The people of Ukraine fighting for our freedom are forever grateful to Gavin Wood @gavofyork for the generous donation of $5M of @Polkadot $DOT as promised publicly. Thank you from all of us here in Ukraine working for a peaceful future.”

Donations, and bypassing sanctions with crypto

According to Elliptic, Ukraine has raised $51 million in crypto from 89,000 donations since the war began. Cryptocurrency has been a great alternative for receiving monetary aid directly and a tool to bypass financial or monetary barriers or sanctions. On both sides, Russia and Ukraine have benefited greatly using cryptocurrency – one party uses it in receiving monetary aid while the other party sees it as a tool to bypass all monetary sanction imposed on her and all her Oligarchs.

Some experts have expressed their views on Russian government using crypto to bypass all sanctions imposed on her.

As reported by cbsnews.com, “Russian leaders could turn to crypto to help the country prop up its financial sector, while noting that digital currencies are unlikely to serve as a substitute for corporate transactions over time, said David Szakonyi.

The Ukrainian government are pushing for the closure of digital wallet addresses of Russian users, which allow transaction in crypto coins. Also, U.S law enforcement and Treasury officials are putting in efforts to combat the misuse of crypto to avoid sanctions.

Tweet from Ukraine Vice Prime Minister Mykhailo Fedorov:

I’m asking all major crypto exchanges to block addresses of Russian users. It’s crucial to freeze not only the addresses linked to Russian and Belarusian politicians, but also to sabotage ordinary users.

Neutral Exchanges

Despite sanctions on Russia, many major cryptocurrency exchanges didn’t honor the request from the Ukrainian Vice Prime Minister regarding the closure of all Russian user’s digital wallets.

Binance one of the leading cryptocurrency exchanges, while responding to this, said,

“Crypto is meant to provide greater financial freedom for people across the globe. To unilaterally decide to ban people’s access to their crypto would fly in the face of the reason why crypto exists”.

Johnny Lyu, CEO of the crypto exchange KuCoin, told CNBC that the company considered itself “a neutral platform” that would not do anything beyond what is legally required, adding it didn’t support “actions that increase” tensions.

Cryptocurrencies narrative may change due to the Russia-Ukraine War as crypto experts expressed their view about this. According to Ajeet Khurana, the fact that the Ukrainian government is also seeking contributions in crypto validates the use of blockchain-based money.

Also, as reported by Outlookindia.com, if Russia indeed starts using cryptocurrencies to avoid the impact of recent sanctions, we may see jurisdictions worldwide, particularly the US and Europe, coming up with strict regulations around cryptocurrencies, said Purushottam Anand, advocate and founder of Crypto Legal, a blockchain law firm.

The narrative about crypto may change due to the ongoing war resulting either positive or negative, but as it stands, its positive. The world economy needs crypto, and this alone makes the future of crypto look bright. As mentioned by Sharat Chandra, vice-president, research and strategy, EarthID, a global decentralized self-sovereign identity management platform, “When the fiat monetary system falls apart, crypto will be the only savior”.

Cryptocurrency can’t be back benched; it’s politically neutral.