Role of Cryptocurrency in Ukraine-Russia war
In the recent history, as a generation, we have witnessed various political conflicts- some involving change of regimes while some involving border clashes and wars! As we enter the 400th day of Russia-Ukraine war, I choose to take the side of peace however, there are certain trends that need attention and they may interest you too! After all, sometimes, the destructive nature of conflict can make it ripe for attention, discussion, and problem-solving! In this era of Globalization, countries tend to depend on each other for various tangible and intangible resources. This makes political conflicts appear all the more unnecessary and illogical. However, for some industries and sectors, such political events present a disguised opportunity. In this post, I will take you through the basics of Cryptocurrency, it’s rate of adoption by countries and how it has has impacted the Ukraine-Russia political conflict.
What is Cryptocurrency?
Moving away from the definition of Cryptocurrency from the graphic above, here is a quick recap of Cryptocurrency basics:
Decentralised or No central authority
In traditional fiat currencies like Rupee, Dollar, Euro, Dirham etc, central authorities and banks control the financial system. However, cryptocurrencies such as Bitcoin and Ethereum help a user bypass the processing and validation of such transactions via a distributed and open network.
Irreversible and Immutable
Transactions cannot be changed once they are recorded on the blockchain.
Anonymous
Two transacting parties do not need to identify themselves when transacting with cryptocurrency. Therefore, users can create anonymous digital identities and digital wallets to transact and still be able to securely authenticate their transactions.
Deflationary by nature
Fiat currencies that central banks can issue and/or print are based on present economic scenario. Inflationary nature of these currencies causes the decrease of value of currency over a period of time. However, many cryptocurrencies have a pre-determined supply of the cryptocurrency at the time of creation. Limited supply of currency causes them to become Deflationary in nature as an increase in demand of the cryptocurrency will cause a corresponding increase in their price.
Objective of using Cryptocurrency over Fiat Currencies?
When it comes to transfer of value, Cryptocurrencies were preferred in key scenarios of the war. Due to traits of Cryptocurrency already shown earlier, transfers are executed virtually instantaneously, securely and directly delivered from one party to another without the need for a transactional intermediary, such as a central bank. However, fiat currencies require a central bank for approvals!
Source: www.bitpanda.com
Rate of Adoption of Cryptocurrency by Nations
According to Investopedia article published in Feb 2023, here is the scale of Crypto-friendliness by 11 nations:
While Denmark, Germany, Japan, United Kingdom, and Switzerland top the list as nations with most Crypto friendly policies; on the other hand, Qatar, China and United Arab Emirates have placed a blanket ban on Cryptocurrency!
Impact of cryptocurrency on Ukraine-Russia war
I wish to clarify at the outset, that neither me nor Social Buzz, supported an armed political conflict as it has forced millions to abandon their homes, shelling of major cities, and laying down the lives of innocents. Through this blog post, I intend to analyze the extent to which Emerging technology or Cryptocurrency has affected the war related efforts. At the outset, I wish to specify the military strength of the 2 countries.
According to globalfirepower.com, in annual survey, Russia is ranked #2 and Ukraine is ranked #15 out of 145 countries on account of PowerIndex.
As you might know by now, Ukraine has a much smaller Defense budget than Russia and consequently, fewer military manpower and arms and ammunition. As a result of Russia’s offensive operations and global outpour of sympathy for Ukraine, the country received donations in crypto and fiat currency in a large amount. However, the amount of donations in cryptocurrency to Ukraine were 44 times of the donations received by Russia in Cryptocurrency.
You might be wondering why would anyone donate for a cause in Crypto when they have the option to donate in a widely recognized fiat currency?
The potential benefits and risks associated with crypto includes evasion of sanctions, cyber crimes and market volatility. Even though, fundraising donations in Crypto pales in comparison to funds raised via Fiat currency however, the Crypto fund raising amounts are worth analysis!
On comparing the Pro-Russia and Pro-Ukraine donations via Cryptocurrency, we came across some interesting stats:
Thus, Pro-Russia groups were able to raise USD 5.4 million while Pro-Ukraine groups were able to raise USD 212 million in Cryptocurrency.
The breakup of Pro-Ukraine donations in Cryptocurrency are as follows:
Why are Cryptocurrency donations to Pro-Russia groups under the scanner?
As we saw above, total pro-Ukrainian crypto fundraising since the war began, tops pro-Russian funding by 44 to one. However, the Cryptocurrency funds raised by Pro Russia groups have raised suspicion! According to 2023 Crypto Crime Report, there were USD 456 million as ransomware payments. In 2022, majority of hackers are believed to be based in Russia. Apart from this, BBC reports that 74% of ransomware revenue goes to Russia-linked hackers.
Moreover, Conti, a Russia-based infamous Ransomware group extorted USD 66 million in 2022. Later, Conti alleged its allegiance to pro Russia efforts in the war.
KillNet
Another notorious group Pro Russian group has targeted Healthcare organizations. According to Chain Analysis, KillNet has used it’s platform to advertise fundraisers for purchasing military equipment for Russian military. Due to the above reports, pro-Russia Crypto donations have come under suspicion! Although, it is believed that many such reports are considered biased however, I am only presenting report findings.
Check out our blog posts on Metaverse: Decoding Metaverse : The changing landscape of World Wide Web
Conclusion
Just like every coin has 2 sides, Cryptocurrency has it’s merits and demerits. The merits seemingly outnumber the demerits. However, in my honest opinion, ethics should be a guiding factor when it comes to responsible usage of emerging technologies. In the hands of tyrants, even prosperous cities have fell and on the other hand even common men have brought forth dying cities to life. So, a certain level of checks and balances are necessary to curb any untoward usage of technologies that are meant for the greater good.
Sources
https://blog.chainalysis.com/reports/russia-ukraine-war-cryptocurrency-one-year/
https://www.globalfirepower.com/countries-comparison-detail.php?country1=ukraine&country2=russia file:///D:/IMP%20Data/Downloads/Arab-American-Media-Report-1.pdf
The Role of Social Media in the Arab Uprisings
https://www.usip.org/sites/default/files/resources/PW80.pdf
https://www.weforum.org/agenda/2023/03/the-role-cryptocurrency-crypto-huge-in-ukraine-war-russia/
https://mwi.usma.edu/crypto-at-war-how-digital-currencies-will-shape-the-future-of-conflict/
https://medium.com/the-capital/key-characteristics-of-cryptocurrency-and-why-do-they-matter-to-you-5f33e483a40f/
https://www.bbc.com/news/technology-60378009
https://www.investopedia.com/articles/forex/041515/countries-where-bitcoin-legal-illegal.asp
oh wow! Thank you so much for the thorough information regarding cryptocurrency’s role in the war, I had no idea!!!
Hey Karen,
I could provide you a different perspective of the war! Though I hate wars as much as any normal citizen does, but i like observing all the stakeholders and their activities. Am i sounding like a spy right now? Hahaa
Your article on the role of cryptocurrency in political conflict is really insightful and thought-provoking. I appreciate the unique perspective you bring to the table. Keep up the great work!
Thank you for your kind words, Monidipa!
With all that is happening in the world my father has been following crypto very closely. Going to share this article with him.
Hey Amber,
Here’s hoping that your father likes the article! Fingers crossed!!!
Hey there! Your article on the role of cryptocurrency in political conflict was an interesting read. I appreciate how you shed light on this unique angle and provided insightful examples. Looking forward to more!