Ukraine has been purchasing military equipment using cryptocurrencies, with the nation's deputy digital minister claiming that 60% of suppliers were able to accept crypto in return for combat essentials such as "helmets and bullet proof vests".
One year ago, Russian president Vladimir Putin began the invasion of Ukraine.
Two days after the war broke out on 24 February 2022, the Ukrainian government's Twitter accounts posted requests for cryptocurrency donations in bitcoin (BTC-USD), ethereum (ETH-USD) and the USDT (USDT-USD) stablecoin.
As blockchains are transparent publicly distributed ledgers, it can be seen that more than 100,000 people have sent crypto to Ukraine. The country claims that some of these donations came from Russians, who have sent "significant amounts".
On this week's episode of Yahoo Finance UK's The Crypto Mile, Ukrainian deputy digital minister Alex Bornyakov described cryptocurrency donations to Ukraine as varying "from one dollars worth, to millions of dollars".
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He said that Ukraine turned to crypto at the start of the invasion because the nation needed help immediately.
"If we used the traditional financial system it was going to take days," he said.
"We were able to secure the purchase of vital items in no time at all via crypto, and what is amazing is that around 60% of suppliers were able to accept crypto, I didn't expect this."
Although his interview with The Crypto Mile via satellite internet link from his office in Ukraine was restricted by periodic power cuts, he was able to add: "Companies manufacturing goods like bulletproof vests, helmets and different kind of optics, even they were able to receive crypto".
Stand with the people of Ukraine. Now accepting cryptocurrency donations. Bitcoin, Ethereum and USDT.
BTC - 357a3So9CbsNfBBgFYACGvxxS6tMaDoa1P
ETH and USDT (ERC-20) - 0x165CD37b4C644C2921454429E7F9358d18A45e14
— Ukraine / Україна (@Ukraine) February 26, 2022
Alona Shevchenko, co-founder Ukraine DAO, told Yahoo Finance UK: “In the beginning of the full scale invasion a year ago, Ukraine found itself in an extremely tough situation and those first days were absolutely critical for our defence.
"The central bank introduced limits on foreign currency transfers in and out of Ukraine to stop the run on the hryvnia.
"Thanks to crypto we were able to cover some of our defenders' immediate needs, there was literally no other way at the time."
One-third of the donated amount has come through the Crypto Fund Aid For Ukraine initiative, which is powered by Ukraine-based crypto platform Kuna and blockchain company Everstake, and supported by the Ministry of Digital Transformation of Ukraine.
Bornyakov said the Crypto Fund Aid For Ukraine was "an absolute success, not just from a standpoint on how much money that has been raised, but also from the procedure, the efficiencies and speed of access funds through crypto".
In August, Ukraine's vice-prime minister Mykhailo Fedorov said the country had purchased military equipment including medical kits, rifle scopes, optical sights and thermal imagers.SDC stablecoin," Bornyakov said.
In August, Ukraine's vice prime minister Mykhailo Fedorov said the country had purchaed military equipment including medical kits, rifle scopes, optical sights and thermal imagers.
With $54 M raised by @_AidForUkraine, we've supplied our defenders with military equipment, armor clothes, medicines and even vehicles. Thanks to the crypto community for support since the start of the full-scale invasion! Donation by donation to the big victory. Report below. pic.twitter.com/lifHAP8R4f
— Mykhailo Fedorov (@FedorovMykhailo) August 17, 2022
Crypto donations to Ukraine 'faster and more efficient than traditional financial services'
Mark Lurie, CEO and co-founder of Shipyard Software, said: "In a first-world, peace-time context, crypto’s benefits are marginal. While they are faster, more transparent and more efficient, most of the time they are less convenient.
"The Russo-Ukrainian war has put the failings of the traditional financial system into perspective.
"Ukrainians need money to pay for everything from food to drones, but receiving and sending that money has proven extremely difficult during wartime.
"Standard two-day settlement for international wires may already feel like a lifetime when food is scarce and bullets are flying, but in practice wires in and out of Ukraine are often delayed or even blocked by US and International banks struggling to monitor the source and destination of funds to prevent money laundering, including by the enemy."
Because cryptocurrency payments are decentralised, money transfers do not require review by intermediaries such as banks or payment processors, Lurie said. As a result, transactions can be completed instantly and without delays caused by third-party authorisation.
Has this set a precedent for the use of cryptocurrencies in crises?
Lurie believes that the war in Ukraine has set a precedent for the use of cryptocurrency in humanitarian efforts during war and after natural disasters.
He said: "It showcases the potential for cryptocurrency to be a viable, more resilient alternative to traditional financial systems.
"Perhaps the biggest impact of the Ukraine war on crypto is a new narrative. Before, crypto was seen as a method to evade law enforcement. Now, it is recognised as a tool to empower freedom fighters.
"More and more people are willing to work with crypto to help Ukraine, and as they do they realise first-hand that crypto is not only legitimate, but in many ways better.
"What’s really interesting to me is how crypto didn’t become a giant money laundering tool for the Russian side of the war, as many people had postulated."
Russians using crypto channels to anonymously send donations to Ukraine
Russians are sending "significant amounts of money" through cryptocurrency to help Ukraine, according to Bornyakov.
"Crypto, in certain cases, offers an anonymous way to transfer money," he said.
"The Russian people who have donated have sent significant amounts of money.
"I understand that from within Russia there is no other way for them to do this other than through crypto."
Many charities and NGOs are accepting crypto donations for Ukrainian humanitarian relief with bitcoin and ethereum wallet addresses posted on their websites.
Crypto, however, still has significant issues of its own with critics pointing out that despite claims of being decentralised it is highly concentrated in the hands of a few big crypto exchanges, often with opaque transaction rules and inherently speculative with millions of people losing money when crypto firms go burst with FTX the most spectacular among recent collapses.