Bitcoin price hit record highs in 2021, but slipped below $40,000 in January 2022. — © AFP
After evacuating part of his team from Kiev, Mike Chobanian, boss of cryptocurrency exchange Kuna, is watching with weary eyes the effects of the Russian invasion on his thriving industry.
“Business is rolling, but we are in survival mode here,” the 37-year-old boss said in a video call from his current hideout after leaving the Ukrainian capital.
Russia’s military build-up led many Ukrainians to turn to cryptocurrencies, before the invasion took hold of the sector.
But it continues to facilitate global fundraising efforts, albeit through an opaque decentralized system that Russia could also exploit to circumvent sanctions.
The Ukrainian government imposed sanctions on the ruble on Friday, forcing Chobanian to suspend cryptocurrency trading with the Russian currency.
“But who cares when it’s war?” said Chobanian.
Its platform has seen a steady increase in business from Ukrainian accounts over the past few weeks.
Worried about rising tensions, locals were buying stablecoins, the dollar-backed electronic currencies often criticized by Western regulators for their opacity.
“Bitcoin, you get into the game, you don’t know if it’s going to go up or down,” he explained.
“But here you’re trying to preserve what you have and people see the US dollar as a safe haven. Cash is useless, you can’t do much with it, it can be easily carried away with a gun. USDT (stablecoin) is a safe haven.
But trade has become increasingly difficult since the invasion.
Several cryptocurrency users, however, have launched fundraisers which they claim are dedicated to helping the Ukrainian military and relief efforts.
More than $4 million in cryptocurrency has arrived in just two days on a single fundraising wallet for the “Come Back Alive” organization, cryptocurrency research firm Elliptic said on Friday.
– Violation of sanctions –
“There is no limit, it can be lifted anywhere in the world, it does not depend on the banking system, it is more transparent because it is a blockchain. It’s a better option,” Chobanian said.
This enthusiasm is not fully shared by the Ukrainian government.
On the communication site UkraineNOW, the Ministry of Defense calls for donations by bank transfer, but specifies that “national legislation does not allow the Ministry of Defense of Ukraine to use other payment systems (‘Webmoney ‘, ‘Bitcoin’, ‘PayPal’, etc.).”
And the same decentralized network that makes cryptocurrencies attractive to Ukrainian fundraisers could also benefit Russia.
Among the sanctions envisaged against Moscow is the exclusion of the Swift system, which allows interbank settlements between financial institutions around the world.
Some fear that cryptocurrencies could allow Russia to circumvent these sanctions.
“North Korea has conducted robust hacking efforts with the aim of stealing cryptocurrency from exchanges and DeFi platforms,” explained Caroline Malcolm of analytics firm Chainalysis.
“They were able to bring billions of dollars in funds to the country, avoiding sanctions.”
Iran has also used cryptocurrency to bring money into the country, but mined it rather than hacking it, she added.
But as with the traditional financial system, “the cryptocurrency ecosystem can put in place measures to identify transactions from identified sanctioned entities,” she said.
This could be mainly achieved by analyzing data from blockchains – the ledgers where all cryptocurrency transactions are recorded.