The Russian invasion of Ukraine has been one of the biggest European conflicts of the century, with major negative impacts on the global economy as well. The global stock markets have corrected in the past week, with the Russian market down more than 50% after several sanctions were imposed by the rest of the world.
Naturally, many will be eager to know the role of cryptocurrencies and the possible volatilities that may come as a result of this conflict. But, rather than the possibility of the digital assets correcting massively, cryptocurrencies have been associated with large donations to the Ukrainians to aid them in this conflict. But with the possibility of major exchanges banning cryptocurrencies in Russia, what else can we see pan out in 2022?
Millions donated in cryptocurrencies
After the massive invasion of Ukraine by their Russian neighbours, aid has been sent by various governments and other neighbouring countries, but the world of digital assets has also played a big role in helping Ukraine.
It has been reported that a total of $20 million has been donated in support of Ukraine’s resistance movement in cryptocurrencies from around the world.
The Ukraine Twitter account tweeted about the matter, asking for donations in Bitcoin, Ethereum and USDT.
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
The initial news was met with a flurry of scepticism, as many reported the possibility of scam and fraudulent phishing attacks. But the theory has since been debunked by the Ukrainian Twitter account and Vitalik Buterin himself.
Buterin, being Russian himself, shared his thoughts on the matter, saying – “Very upset by Putin’s decision to abandon the possibility of a peaceful solution to the dispute with Ukraine and go to war instead. It was a crime against the Ukrainian and Russian people”.
Getting some confirmations from a couple sources that it's legit. Deleting my warning for now. But continue to be vigilant, and always be slow and careful when sending irreversible crypto transactions. https://t.co/Odv5pxf3mp
— vitalik.eth (@VitalikButerin) February 26, 2022
Blockchain.com reported that the total donations exceeded over $10 million as of February 28, which has already been transferred out by the Ukrainian government.
But a cryptocurrency security company named Elliptic has reported that the Ukrainian government and NGOs have raised over $20 million in donations in cryptocurrencies alone. A single donation by a user also exceeded over $3 million in Bitcoin.
Ukraine asks for the ban of Russian accounts
While cryptocurrencies have been used to supply money for the Ukrainian regime to fight off the Russian troops, there has also been a plea made by the Ukrainian Prime Minister and Minister of Digital transformation, Mykhailo Federov, to ban all Russian crypto users.
I'm asking all major crypto exchanges to block addresses of Russian users.
It's crucial to freeze not only the addresses linked to Russian and Belarusian politicians, but also to sabotage ordinary users.
— Mykhailo Fedorov (@FedorovMykhailo) February 27, 2022
In his Tweet, the VP said – “I’m asking all major crypto exchanges to block addresses of Russian users. It’s crucial to freeze not only the addresses linked to Russian and Belarusian politicians but also to sabotage ordinary users.”
This followed after various countries including the USA, United Kingdom, Germany and other influential powers all imposed heavy sanctions that have played an adverse effect on the Russian economy. The belief is that Russians could use cryptocurrencies to evade the sanctions that are being put in place.
But such a sanction on cryptocurrency users would pose a big threat to the global digital assets industry as well.
Banning cryptocurrencies for an entire country would also go against the concept of decentralisation and autonomy to users, which was the exact opposite reason the digital assets were created in the first place.
Binance and Kraken’s founders refuse to ban cryptos in Russia
As was expected, the major crypto exchanges have not gone ahead and accepted this request by Ukraine. The biggest crypto exchange in the world, Binance said that while they will block the accounts of Russian individuals who have been sanctioned, they will not unilaterally freeze accounts of all Russian users, according to CNBC.
In a message by the company to a CNBC spokesperson, Binance revealed that crypto was created to provide greater financial freedom to users across the globe, which is why they decided to not ban the accounts of an entire country’s worth of users.
But the spokesperson also said that they will be taking the necessary steps to minimize the impact to innocent users while making sure the sanctions levied against the country’s users are carried out in accordance.
Another popular cryptocurrency exchange, Kraken, has released a similar statement. Jesse Powell, the CEO of Kraken released the news on Twitter.
1/6 I understand the rationale for this request but, despite my deep respect for the Ukrainian people, @krakenfx cannot freeze the accounts of our Russian clients without a legal requirement to do so.
— Jesse Powell (@jespow) February 28, 2022
Replying to the Vice Prime Minister’s order, he tweeted – “I understand the rationale for this request but, despite my deep respect for the Ukrainian people, Kraken cannot freeze the accounts of our Russian clients without a legal requirement to do so. Russians should be aware that such a requirement could be imminent”.
Powell went on to mention that different country governments could make this a legal requirement, which then would force the various exchanges to ban Russian users.
If this ever happens, we could see a price correction in the crypto markets, since the country holds 12% of the entire market. That is a total estimated market cap of $214 billion, which would not be the ideal solution for the markets.
For now, Russian users are free to hold cryptocurrencies, but it could all change very soon.