Crypto and the Russian-Ukrainian Crisis: Is There a Connection?

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It’s a simple reality that cryptocurrencies offer users ways around governmental monetary limitations and policies. The decentralized technology underlying digital assets ensures anyone can transfer money anywhere in the world with little issue, assuming they have access to a crypto wallet and reliable internet.

Crypto’s alternative nature has held prominence in the current Russian and Ukrainian conflict, for example, as users worldwide have provided Ukrainians with financial support via Bitcoin. However, these assets may serve another purpose in the escalating crisis — providing salvation for the Russian citizens dealing with sanctions and other limitations from outside countries.

In fact, Ukraine’s deputy minister at the Ministry of Digital Transformation revealed it has received over $100 million in crypto, which has been used to provide soldiers with bulletproof vests, packed lunches, and much more. Conversely, Russian citizens are reportedly using crypto as an escape from their current financial status.

Crypto and the Ruble

Recent events have caused the Russian ruble to hit a record low, with the asset hitting lower than one cent as of early March, as reported by CBS. At the time, a head at the crypto-focused firm Arcane Research, Bendik Schei, noted to CBS that Russian citizens were looking toward stablecoins as a reprieve from their crashing fiat, believing that their funds were unsafe in traditional banks.

Conversely, there’s reason to believe the Russian government utilizes crypto to avoid global sanctions. While it’s difficult to say that crypto can serve as a complete alternative to sanctions, the freedom of digital assets is undoubtedly a possible economic avenue.

Crypto enthusiasts love to dream and talk about crypto’s potential applications in the real world, but this conflict brings actual use cases alongside their possible consequences to light. As of now, digital assets are being used on both sides of a war effort. 

Global exchanges such as Binance are aiming to remain relatively neutral here. Still, extenuating circumstances, such as Mastercard and Visa banning transactions from Russian-issued cards, are making that stance difficult for the exchange. 

That said, Binance has also made a point to ban the accounts of Russian officials who have been specifically targeted by US sanctions rather than ban the accounts of all Russian citizens. Wallets and exchanges like Coinbase and MetaMask, on the other hand, are more brazen in their actions.

Speaking to Gokhshtein Media is Eliézer Ndinga, the Director of Research at Index Token Issuer, who notes:

"Coinbase announced that it had blocked more than 25,000 wallet addresses linked to Russian individuals or entities who are suspected of having engaged in illicit activity. Similarly, but with users based in another sanctioned state, OpenSea deactivated Iranian-based accounts without prior notice or explanation, on the back of the escalating conversation about sanctions. Moreover, two fundamental pieces of the Ethereum ecosystem, Infura and MetaMask, are restricting access to users in certain geographical areas, shying away from giving any specific details."

The Future Impact of Crypto

Now, many could argue that centralized exchanges choosing who can utilize cryptocurrencies defeats the entire point of Web 3 and decentralized digital assets. However, that’s the consequence of the industry using centralized exchanges to facilitate much of our access to decentralized assets.

Centralized entities do make it easier to access crypto, especially for big-time investors who don’t keep up to date with technological advancements. In fact, one could argue crypto would be nowhere near as successful or mainstream as it is now without centralized entities. But seeing these platforms control who and what can access them directly results from that clinging to the old world. 

From here, it’s difficult to say how global conflicts and crypto entities will intersect. Will we see more centralized entities taking sides, or will the crypto curious make the jump to decentralized only platforms and wallets? 

Such events can also lead to increased crypto education. As citizens worldwide hear how crypto is being used by both sides of the crisis, they might be incentivized to learn more about digital assets and come to their own conclusions regarding the decentralized industry.

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