Concurrent with the military onslaught, Ukraine and Russia appear to be waging a parallel war in the crypto sphere. While Ukraine has publicly asked for cryptocurrency donations since the start of the conflict, the country just froze a wallet used to fund Russian military campaigns.
The first crypto world war?
Observers have already dropped the term crypto world war just weeks after the war in Ukraine began. As soon as the first Russian assaults began, Ukraine publicly asked for cryptocurrency donations to organize its defense. Why cryptocurrencies? Mainly because with digital assets, funds are quickly available. In April, for example, Ukraine was able to raise the equivalent of $100 million in cryptos. The government acknowledges that the amount is much lower than that obtained in fiat currencies. Nevertheless, in the absence of an intermediary, the funds are quickly available.
Russia is also partly fueling the crypto war on its side. According to a recent report by blockchain research firm Chainalysis, the country has so far raised nearly $2.2 million. The Russians have mainly received donations in bitcoin (BTC) and ether (ETH). The amount is still paltry compared to the amount raised by Ukraine. Although the contributions are “small,” the Russians claim that they provide significant support for the effectiveness of its troops. The funds are mainly allocated to propaganda on various websites and the purchase of military equipment (drones, communication devices, weapons, bulletproof vests …).
Ukraine is waging a crypto war against Russia.
Since the beginning of the war in Ukraine, international coalitions have imposed financial sanctions on Russia. These are aimed at weakening its ability to finance the war, while sparing vital sectors such as food, agriculture, health and pharmaceuticals. The penalties correspond to restrictive measures on the import and export of certain goods. The products concerned are carefully selected to maximize the impact on Russia and minimize the damage on other countries. As a result of these sanctions, experts predict an increase in inflation in Russia. An increase that could rise to 22%.
At the same time, Ukraine has just organized the crypto blockade of Russia. The Ukrainian Security Service SSU (Security Service of Ukraine) has seized and blocked a portfolio of cryptocurrencies. This agency works on tracking funds and transferring them under Ukrainian jurisdiction. The wallet, used to fund the Russian military campaign, belonged to an unidentified Russian citizen. The wallet contained nearly $19,500 in cryptos. The seizure was reportedly possible thanks to evidence provided by anonymous foreign crypto companies. SSU warns that the hunt for pro-Russian wallets is on. The war is declared.
Ukraine takes advantage of the donations to defend itself. Russia uses it to finance its army. The war in Ukraine has truly acted as a catalyst for crypto transactions. Aware of the potential of digital assets on multiple levels, both countries have obviously decided to wage a more sophisticated parallel war. For observers, this situation could accelerate the establishment of a framework that will come to regulate cryptocurrencies. And this, knowing that Russia may also consider going this route to circumvent sanctions.