Bitcoin was created in a time of global uncertainty, and it’s taking another crisis to really show its global relevance.
Governments and their leaders come and go, but the decisions they make can have permanent consequences on their people, and the peoples of the countries they enter into conflict with. We’re getting a front-row seat to this unfolding in Ukraine, as Putin continues to demonstrate his resolve in leading an unnecessary war that will not only count its victims in lives lost but in the economic devastation that will be felt in both Ukraine and Russia for decades to come.
This is a very tense political situation that has seemingly brought the West together against Putin’s Russia. In addition, freedom-loving citizens around the world have been inspired by the plight of the Ukrainian people, and particularly by their leader, President Zelensky. Support in many forms has been flooding towards Ukraine.
Part of this outpouring of support has come from an unexpected corner of the internet: the global cryptocurrency community. Alex Bornyakov, Ukraine’s Deputy Prime Minister of Digital Transformation, credits the crypto community for almost $100 million in direct support since the beginning of the conflict. For context, this is roughly on par with what a country like Canada has been able to contribute to the cause.1“On February 25, 2022, Canada announced that it would match donations made by individual Canadians to the Canadian Red Cross’s Ukraine Humanitarian Crisis up to a maximum of $10 million. On March 10, 2022, Canada announced that this amount would be increased up to a maximum of $30 million. This brings Canada’s total funding allocated to Ukraine for humanitarian assistance to $145 million to date in 2022. This includes the initial $15 million announced in January and $100 million announced on March 1” https://www.canada.ca/en/global-affairs/news/2022/03/canadas-humanitarian-assistance-for-ukraine.html
It’s hard to find an argument against this kind of compassionate generosity at a time of extreme need. In essence, Bitcoin is proving itself uniquely suited to instantly launch a global crowdfunding campaign amid a war, where supporters are coming from practically every country on earth.
Even Elizabeth Warren (Bitcoin’s legislative nemesis in the U.S.) would have a hard time denying the benefits this has created for Ukraine.
On top of that, since the beginning of this crisis, millions of Ukrainians have fled the country as refugees; many with only the clothes on their backs, a small amount of cash, and maybe a debit card. Certain Ukrainian banks, protecting against bank runs, have had to limit withdrawals both inside and outside of the country. Some refugees have reportedly experienced their debit cards not working once in a neighbouring country. Although it’s impossible to know how many, Ukrainians who were fortunate enough to convert to Bitcoin before the crisis could cross the border with their life savings. This ability to safeguard assets outside of an unstable economy is incredibly powerful.
Meanwhile, further north in Russia, citizens of that country are facing unprecedented economic sanctions because of the actions of their leaders.2Tracking sanctions against Russia The Western world has almost unanimously acted to completely isolate the Russian economy to deter any escalation in the military actions being taken by Putin. Of course, the collateral damage is being felt by everyday Russians who have seen their Visa cards stop working, their life savings plummet in value as the Ruble tumbles, and their overall connections with the world cut off.3“The Russian currency has lost more than half its value since President Vladimir Putin launched the invasion of Ukraine on Feb. 24. On an annual basis, inflation jumped to 9.2% in February, up from 8.7% a month earlier. Economists expect the pace of annual price rises will surpass 20% by the end of March.” https://www.themoscowtimes.com/2022/03/10/russian-prices-rising-fastest-in-24-years-on-ruble-collapse-a76858
Some have reacted by turning to cryptocurrencies. The criticism, of course, is pointing to the fact that Bitcoin can be used to circumvent economic sanctions, but the reality is far less dystopian. Although Bitcoin is a meaningful market in terms of value, it has proven itself to not be a great tool for criminals, terrorists, or sanctioned individuals trying to hide the flow of their funds. Ultimately, to get in and out of cryptocurrencies, people are required to interact with regulated exchanges; many of whom are similarly applying the sanctions imposed by their governments.
And even if an individual is avoiding exchanges and holding their assets directly in Bitcoin, these transactions are published to the world’s most transparent ledger and financial system. Governments and law enforcement agencies around the world are equipped with powerful analytical and forensic auditing tools that can quite easily pinpoint the likely transactions associated with a “black-listed” person. In fact, there’s a good argument to make that financial transactions occurring on the Bitcoin network are the least likely to be associated with wrongdoing of any kind. In essence, Bitcoin is a criminal’s worst option.4“Since Bitcoin transactions are public, it is a matter of identifying which exchanges the coins are being moved to be sold and the accounts can be frozen. Stolen coins are then gotten back from the exchanges. As expected, a currency and/or transaction that can be tracked with such efficiency is not a good tool for crime. Thus leading to the fact that Bitcoin is bad for crime.” https://www.newsbtc.com/analysis/btc/why-bitcoin-is-actually-bad-for-crime-contrary-to-belief/ You’d be better off loading suitcases of U.S. dollar bills into a private jet destined for a non-extradition country.
So ultimately, to the extent there are meaningful movements of Bitcoin happening in Russia, it primarily reflects the desire of everyday Russians to dissociate themselves from their national currency, and find some amount of freedom and independence while still being subjugated daily to the whims of the world’s leading villain.
This too we should celebrate. The Russian people are not the enemy of the West, and while we seek to de-escalate a war with Russia, we should also seek to enable Russians to exercise their own form of protest against their leaders. For them, Bitcoin represents a tool for economic freedom.
Of course, these are complex issues that I don’t pretend to have the answers to. But times of crisis can lead to reactionary policies that cause more harm than good. So while we continue to watch this crisis unfold, let’s be thoughtful in our reactions.
Bitcoin is designed to be an apolitical tool in a world of increasingly complex political conflicts. To view it through any other lens is to not understand its relevance in the 21st century. This will be difficult for politicians to contend with, but it’s the fundamental reason this technology matters.
The lessons about Bitcoin we learn from Ukraine and Russia can serve us to be better equipped when the next authoritarian leader looks to put troops on the ground of their small neighbour. An event we hope doesn’t happen soon, but one we should be prepared for.
I can say with absolute confidence that the world’s cryptocurrency community will be ready to step in and help again.