“If you don’t believe it or understand it, I don’t have time to try to convince you, I’m sorry,” Satoshi Nakamoto, the pseudonym of the inventor of the virtual currency Bitcoin, thus responded to sceptics of his creation.
With no time or need to be persuaded by the invention of cryptocurrencies was the Ukrainian government, which, within three days of the start of the conflict with Russia, launched its first digital money fundraising campaign in March 2022.
After the Russian invasion, Ukraine faced an additional challenge, the financial challenge, with faltering conventional economic systems and challenges including a run on banks, a blockade of the domestic currency market, and a rapid devaluation of its currency, the Ukrainian hryvnia.
Kyiv exploited the speed and decentralized nature of cryptocurrencies by using them to raise funds and finding in them an unexpected ally. In the context of the emergency, the country has turned to digital currencies such as Bitcoin, Ethereum, and Tether, just a few of the most widely used cryptocurrencies, using social media to obtain immediate financial aid.
The government of Ukrainian President Volodymyr Zelens’kyj has also launched fundraising campaigns through celebrities such as professional boxer Wladimir Klitschko, (brother of Kyiv Mayor Vitali Klitschko) who posted the sale of a collection of NFTs, the acronym for a non-fungible token, a non-copyable digital asset representing a real-world object, to raise money for the Red Cross and UNICEF.
The result? A significant flow of donations showed the potential of cryptocurrencies in bolstering a country’s defence efforts in times of crisis: “The Ukrainian people are grateful for the support and donations of the global crypto community as we protect our freedom,” the Ukrainian government tweeted on social X in May 2022.
The state was not entirely unprepared for this manoeuvre. Before the Russian invasion, high inflation and low trust in banking institutions had already allowed this type of transaction to spread, according to an analysis by the Global Crypto Adoption Index by Chainalysis, an American blockchain analytics company. The war accelerated an existing trend and led in March 2022, to a rapid legalization of cryptocurrencies in the Ukrainian financial system. This step removed barriers that prevented digital currency exchanges and allowed banks to open accounts for virtual transaction companies.
Ukraine, in 2023, went on to rank fifth in the global digital currency adoption index according to Chainalysis. Today, as the conflict entered its second year, more than $230 million in blockchain assets (advanced database mechanism that enables information sharing on cryptocurrency exchanges) have been donated to war efforts, according to Elliptic, a blockchain analytics company: «For the first time in the history of crypto-exchanges, Binance to name one has entered an interstate conflict and, the first time, weapons companies have accepted payments in cryptocurrencies», tells Elham Makdoum, a policy analyst specializing in crypto-intelligence and cryptocurrency geopolitics. Despite this success, the sums raised through cryptocurrencies remain far from comparable to the military aid provided through aid packages to Kyiv by countries in the international community.
The digital currencies that have helped support Ukraine at a time of extreme need, however, have also been and, are being used, by the other side, Russia: albeit to a lesser extent, Chainalysis reports that about 100 pro-Russian groups raised $5.4 million in cryptocurrencies in 2023 alone.
The speed, and immediacy of sending and receiving money have demonstrated the effectiveness of the virtual tool for both sides in the context of war, showing how their enhancement could have serious repercussions in the security field: «Thinking of cryptocurrencies as something ‘scary’ is wrong. The weapon is not technology, the weapon is ours, of those who are supposed to turn off conflicts. When it comes to technology one must respect its neutrality, it cannot be the “evil.” Everything depends on its use», comments Gian Luca Comandini blockchain expert and professor of cyber security in the Department of Economics and Law at the University of Macerata.
Although since its invention cryptocurrency technology has been associated with non-transparent use, the criticality of transactions lies not in the impossibility of tracking cryptocurrency exchanges but, in the lack of tools capable of tracking their transactions: «Today there are 14,000 cryptocurrencies. We are all looking at and talking about Bitcoin, but if you used one of the other 13,999, albeit traceable, no one would notice. It would be like looking for a needle in a haystack», the cyber security professor continues.
The possibility of not only individuals but also governments deciding to conduct transactions to third countries via cryptocurrency, without the possibility of being tracked and leaving the public and the world in the dark, is now a real possibility: «It’s already a more than likely reality. Ten years from now, perhaps, we will have the tools to trace hidden monetary exchanges between countries retroactively», says Comandini.
However, this neutral technology, which can be used in millions of ways, and for just as many purposes, has recently been hit by a surge: Bitcoin has grown to all-time highs. «It’s a fledgling currency whose full potential we haven’t seen yet», comments the professor. The context in which this growth is taking place is one in which the BRICS nations, the core initially formed by Brazil, Russia, India, China, South Africa with the addition in 2024 of Egypt, Ethiopia, Iran and the United Arab Emirates, plan to launch a new blockchain system to make payments outside the dollar-driven system: «Although the cryptocurrency market will remain volatile, the trend premised and promised is one of steady expansion driven by the growing number of investors, attracted by the increasing public and media attention to the phenomenon», Comandini concludes.
Have also a look at : https://zetaluiss.it/2024/02/23/ucraina-finanziamenti-stati-uniti-militari/
