The two critical steps taken in the most challenging times show how crypto helps Ukraine, brings support it needs during the invasion and turn into the digital country it dreams of.
Two days ago, Ukraine launched a crypto donation site to collect crypto and fiat money to help with their fight against Russia, which started an invasion on the 24th of February. The country’s president Volodymyr Zelenskyy also signed a bill on Wednesday, making bitcoin and cryptocurrencies legal in the besieged country.
How do donations work?
Ukraine was working on digitalizing most government services before the invasion, and the current donation initiative and the crypto law show great promise on this front.
The Ukraine Ministry of Digital Transformation, FTX, and Everstake is behind the crypto donation project. And according to the site, assets of more than $55M have been collected. The project first started with support for BTC (Bitcoin) and ETH (Ethereum) and now supports 12 currencies, including Bitcoin (BTC), Ethereum (ETH), Tether (USDT), Polkadot (DOT), Solana (SOL), Dogecoin (DOGE), and Monero (XMR). The Ukrainian government also accepts donations in fiat currencies like USD, EUR, GBP, AUD, and CAD.
How will Ukraine use the funds?
The money will be used to assist the Ukrainian military and civilian populations in need of humanitarian assistance.
How to donate money to Ukraine using cryptocurrency?
- Open your browser and go to the official donation site.
- You will see the list of cryptocurrencies supported on the right-hand box. Click on the desired currency.
- Now the crypto wallet address will be shown to you. Copy the address and send money through your crypto wallet or crypto exchange.
How to donate money to Ukraine using cash/fiat currency?
- Open your browser and go to official donation site.
- To donate to Ukraine using fiat money, click on Send Cash from the top menu.
- You will be taken to the account list, click on the currency.
- Using the bank information shown, you can make a transfer to related accounts.
What about Ukraine’s new crypto law?
On the other hand, the new legislation is called “On Virtual Assets” and was signed by the president on Wednesday. It will allow foreign and Ukrainian cryptocurrency exchanges to operate lawfully in Ukraine. The officials called it a significant step toward establishing a legal market for virtual assets in the nation. The law draft was first passed in an almost unanimous vote from the parliament in September 2021. Zelenskyy first vetoed the bill in October, saying creating a new regulatory body for cryptocurrencies would bring recent hardships. After some changes, Zelenskyy signed the bill, which the parliament backed by a majority. It is expected that an open crypto market will be formed in Ukraine for the first time.
Ukraine’s Vice Prime Minister and Minister of Digital Transformation, Mykhailo Fedorov, said the new law would “bring the crypto sector out of the shadows” in a Telegram post.
What will change with the ‘On Virtual Assets’ law?
With the new law, Ukrainian banks can open accounts for crypto companies, and the National Bank of Ukraine and the National Commission on Securities and Stock Market will be regulatory bodies for the sector. Crypto exchanges and companies providing services in Ukraine will now have to register with the government. The ministry said the law would protect cryptocurrency holdings of the Ukrainian citizens with the same legal force as its fiat currency, the hryvnia.
Why can’t crypto be used to avoid sanctions?
When many countries and companies started imposing sanctions on Russia and their currency, the ruble tanked. The crypto scene got ideas about how Russian people and companies would turn to cryptocurrencies to handle day-to-day business. Especially Russian oligarchs were thought to protect their wealth, and they would convert their assets to crypto, which would make the crypto prices hike again. This did not happen to Russia, but many Ukrainians bought crypto assets, afraid their currency would also tank. Kuma, the Ukrainian crypto exchange, witnessed a 200 percent surge in trades as Russia invaded Ukraine.
But let’s go back to the original question in the light of the latest developments. Is it possible for Russia to use bitcoin and other cryptocurrencies to avoid sanctions?
Because bitcoin and other digital currencies are frequently decentralized, they aren’t controlled or issued by a central authority like a central bank. When crypto is transferred to others, it doesn’t follow the usual financial plumbing route.
Blockchain allows tracking the movement of funds
Because the technology that underpins bitcoin, blockchain, is a public ledger of activity, it’s straightforward to follow transactions from one account to another.
More liquidity is needed for oligarchs to convert assets to crypto
A tremendous amount of liquidity is needed to move the wealth of Russian oligarchs and companies to crypto. And since liquidity in crypto is still limited compared to other assets in the world, it would be very hard.
Many exchanges follow the rules
One would quickly say a situation like this would put cryptocurrency exchanges on high alert, especially for those functioning in the US. Sanctions laws apply to all US people and businesses. That is why sanctions would also help people who are using from Russia can be blocked on IP address level.
This week, a group of lawmakers asked the US Treasury Department to make sure that the crypto companies comply with Russia’s sanctions.
Other countries that regulate cryptocurrency
The most famous one is El Salvador. The government legalized bitcoin as a payment method and is attempting to make the country a crypto hotbed.
This month, US President Joe Biden signed an executive order, directing federal agencies to adopt a coordinated approach to digital assets regulation and oversight. The executive order is not a piece of legislation that would govern the cryptocurrency industry.
In certain nations without specific cryptocurrency legislation, such as Ukraine, governments have attempted to bring bitcoin and other digital asset businesses under the purview of financial authorities.
In the United Kingdom, cryptocurrency exchanges must register with the Financial Conduct Authority and are subject to existing laws regarding money laundering. In contrast, Ukraine’s approach was to develop legislation specifically tailored to the digital asset sector.
Cryptocurrency regulation is essential since it protects investors from market manipulation, internet fraud, and cybersecurity risk. It also allows governments to monitor criminal activities such as money laundering.
The Australian government has taken a favorable approach to Bitcoin, whereas Japan and other nations have established cryptocurrency exchanges. Commonwealth Bank in Australia has already launched cryptocurrency transactions. Banks, including NatWest, have already started doing so in other countries, such as the United Kingdom and Canada.
On the other side, several countries, including India and China, have yet to legalize cryptocurrencies like Bitcoin and Ethereum. Still, they have started taxing them, putting cryptocurrencies in a grey area.