How Ukrainians raise funds in cryptocurrency

More than $9.9 million in cryptocurrency has been donated to Ukrainian groups since Russia attacked the country on Feb. 24, according to research firm Elliptic. Decentralized Autonomous Organizations (DAOs) have been formed to support Ukrainians. NFTs were sold to raise funds for the Ukrainian people and army. The country’s official Twitter account stated that it accepts Bitcoin, Ether, and Tether.

Donations like these are usually made the old-fashioned way: through banks. In tech-savvy Ukraine, crypto has become a quick and easy way to manage that money. It’s not just money coming into the country either – the stablecoin Tether is supposed to be pegged to the US dollar. But demand in Ukraine is so high that it has broken its peg and is trading above the dollar – at $1.10, at the time of this writing.

“Coming from Ukraine, it’s completely normal to have stacks of dollars in physical proximity,” says Illia Polosukhin, Ukrainian co-founder of Ethereum competitor NEAR Protocol. He has family in Kharkiv, which was bombed as we spoke. “You don’t trust the local currency and besides, you don’t trust the banks.” This makes Ukraine a natural location for cryptocurrency adoption.

Ukraine is known for its technological talent, with more than 200,000 tech workers, and its IT export business achieved a volume of $6.8 billion last year. It also officially legitimized Bitcoin and other cryptocurrencies last year, in a law regulating digital financial assets and offering fraud protection to Ukrainians. (Previously, crypto existed in a gray area where people could transact, but companies and exchanges that did so attracted the attention of law enforcement.)

The country ranked fourth on Chainalysis’ Global Crypto Adoption Index, behind Vietnam, India, and Pakistan, and around $8 billion worth of cryptocurrency passes through the country every year. “The big idea is to become one of the world’s leading jurisdictions for crypto businesses,” said Alexander Bornyakov, deputy minister of Ukraine’s Ministry of Digital Transformation. The New York Times Last year.

When Polosukhin was in Ukraine last year, he was surprised to see that crypto had proliferated widely, even among people who weren’t working on crypto projects. He noted that Tether is particularly popular, in part because so many Ukrainians were used to working with the dollar as their reserve currency. There was another factor: the relative scarcity of investment options. Other than the real estate market, “the only other opportunity to invest is actually in crypto.”

This may explain why so many cryptocurrency and Web3 supporters have flocked to the country since the February 24 invasion. Although there are concerns that Russian companies are also using cryptocurrency to evade sanctions, the Bank of Russia has been pushing for a ban on cryptocurrencies. (Instead, it favors the digital ruble.) So when Ukraine’s central bank suspended digital money transfers and limited cash withdrawals, crypto – alongside the dollar, gold and cash – has become a viable option for transacting.

Generally, the international crypto community reacted with messages of support for Ukraine. Vitalik Buterin, the creator of Ethereum, tweeted that the invasion was “a crime” against Ukrainians and Russians, adding “Glory to Ukraine”. Later, Buterin retweeted an announcement from Unchain.fund, aimed at humanitarian aid. Nine people must sign for the funds to be distributed; Polosukhin of NEAR is one of the signatories. After we talked, Polosukhin sent me a document with ways to donate.

It’s not just Polosukhin. A member of the Russian performance art group Pussy Riot created UkraineDAO, to use “the power of web3 technology and the community to raise funds”. There’s also RELI3F, “a humanitarian aid initiative founded by NFT/web3 artists collaborating to support the people of Ukraine.” On Twitter, the CEO of the FTX cryptocurrency exchange announced that the company “just gave $25 to every Ukrainian on FTX. Do what you have to do.”

Yev Muchnik, a Ukrainian-born lawyer who has lived in the United States since 1988, works on Ukraine United DAO with PieFi developers. “Everyone is coming together to find ways to help,” she told me. “It really gives you confidence in how people, community and technology can do so much.” Among the DAO’s goals: to create peer-to-peer mesh networks to preserve Internet connectivity, even if centralized Internet service providers fail.

“The missing link is trying to understand what the people on the ground need,” says Muchnik. She believes blockchain technology will make it easier to ensure that funds raised for Ukrainians actually go where they are supposed to. According to what she now understands from people on the ground in Ukraine, people are withdrawing money from their bank accounts and trying to find other ways to transact.

The collective coordination effort shows how crypto can be used as a public good, Muchnik says. She coordinates with people in Ukraine and Poland to verify and authenticate organizations that pop up. The blockchain also means that the flow of funds is traceable; anything unused can be returned.

Oleksii Stoiko runs a popular Telegram channel in Ukraine on cryptocurrency, which he created after being inspired by Bankless, a crypto-focused media organization. He exploded in popularity about a year and a half ago, he told me from his home in the west of the country. It does not surprise him that Ukrainians have turned to crypto. “Ukrainians are natural when it comes to coordination,” he says.

On February 24, Stoiko felt too scared to leave his house, even though there were no Russian troops nearby. “It’s quite, quite scary, actually,” he said. Just before he and I spoke, he was reinforcing the windows of his apartment with duct tape.

When we spoke on the 25th, things in the Stoiko area were mundane except for empty shelves in large supermarkets – the most popular foods have all disappeared – and lots of people running around with suitcases. But raising awareness in the cryptocurrency community has helped him feel less alone. “It really warms my heart to read all these kind words and support for me personally and for all Ukrainians,” he says.

Polosukhin’s goal right now is to ensure that those in need are supported, whether in cryptocurrency or not. It’s easy to send crypto, he notes, but it’s not necessarily easy for people to receive it if the internet or electricity is down. When we spoke, the only thing working in Kharkiv was the mobile phone providers, and Polosukhin didn’t know when they would fail either. For those who had it, money was always the best strategy.

Correction 1:30 p.m. ET on February 26: Elliptic made an error in its calculations: 9.9 million dollars were donated to Ukrainian groups. The article has been updated to reflect their corrected figure.

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