Opinion: Rapid Crypto Contributions for Ukraine, Yet Aid Remained in Fiat Currency

Disclaimer: The opinions expressed in this article are solely those of the author and do not reflect the views and opinions of the editorial team at crypto.news.

The ongoing conflict between Russia and Ukraine, which began two years ago, has been a topic of much discussion. However, one aspect that has not received much attention is the use of cryptocurrency as a means of payment for critical humanitarian aid during the war. The ability to quickly convert and transfer funds in crypto could have allowed for a faster response and potentially saved more lives.

On February 26, 2022, the Minister of Digital Transformations, Mykhailo Fedorov, announced via Twitter that Ukraine would be accepting donations in Ethereum (ETH), Bitcoin (BTC), and Tether (USDT). Within the first few days, the Ukrainian government raised over $13 million in crypto donations. According to a report by Crystal Blockchain published in July 2023, Ukraine received over $225 million in crypto donations from supporters worldwide over a two-year period. The majority of donations were made in ETH, followed by USDT, BTC, and BUSD.

Donations in NFTs also saw a significant increase during this time. One notable donation was a CryptoPunk NFT worth $200,000, which was donated to the Ukrainian government’s ETH account. NFT donations were also made on other blockchains such as Polygon, Solana, Cardano, and FTM. Additionally, UkraineDAO auctioned off the Ukrainian flag as an NFT for $6.5 million in ETH, making it one of the most expensive non-fungible tokens ever sold.

While the amount of crypto donations is relatively small compared to fiat donations, it represents a significant spike in crypto contributions. The decentralized and censorship-resistant nature of crypto makes it well-suited for international fundraising.

However, despite the availability of crypto donations, they were not used directly as a means of payment. Instead, there was a need to convert the funds into fiat currency for further use. This extra step introduced delays and added complexity to the process of purchasing critical supplies. Smaller funds and volunteers who accepted crypto donations also faced challenges in converting them to fiat.

The situation worsened in March 2023 when several crypto exchanges temporarily suspended operations with bank cards in Ukrainian hryvnia, following restrictions imposed by the National Bank of Ukraine. These restrictions were aimed at combating tax evasion and money laundering in gaming platforms but had unintended consequences for crypto users, including smaller funds and individual volunteers.

The lack of a clear regulatory framework for crypto payments in Ukraine has hindered the adoption of crypto as a means of payment. Using digital currencies for goods or services is officially forbidden in Ukraine, which restricts the development of the crypto payments industry and limits the use of crypto donations.

Efforts to establish regulations for the Ukrainian crypto market have faced challenges. The draft Law of Ukraine “On Virtual Assets” was rejected in 2023, and subsequent attempts have focused more on taxation rather than facilitating the use of crypto donations.

In the European Union, where the crypto payments industry is more advanced, there is still a need to bridge the gap between the crypto industry and traditional finance. The upcoming MiCA regulation aims to address this by ensuring trust, protection, and smoother service provision for merchants across the EU.

In conclusion, crypto donations have played a significant role in the war in Ukraine. However, restrictions and a lack of clear regulations have made it difficult to use crypto as a means of payment. By eliminating the need for intermediaries and establishing a clear regulatory framework, the adoption of crypto payments could facilitate faster and more transparent transactions, ensuring that funds are used efficiently and in a timely manner.