Disclosure: The views and opinions expressed herein are solely those of the author and do not represent the views and opinions of the crypto.news editorial.
large-scale invasion that Russia began in Ukraine two years ago. But the issue of cryptocurrencies not continuing to be used as a means of payment for critical humanitarian aid during war, when a quick reaction is required to save more lives, was rarely raised. Millions of accumulated funds had to remain untouched until someone figured out how to convert huge sums into fiat money and transfer them to bank accounts for later use. If cryptocurrency payments were widely accepted, we would have been able to act faster.
The rise of crypto donations
On February 26, 2022, Minister of Digital Transformations Mykhailo Fedorov made a tweet with crypto wallet addresses, saying that Ukraine officially accepts donations in ethereum (eth), bitcoin (btc), and Tether (USDT).
During the first days after this call for crowdfunding, the Ukrainian government crypto-worth-8-million-crowdfunding-appeal-2022-02-27/” target=”_blank” rel=”noopener”>increase more than 13 million dollars. According to Crystal Blockchain crypto-donations-raised-in-support-of-ukraine/” target=”_blank” rel=”noopener”>report Released in July 2023, over two years, Ukraine attracted more than $225 million in cryptocurrency from supporters around the world. Cryptocurrencies have proven to be a quick and inexpensive way to transfer funds from one country to another. According to Crystal's report, more than half of the donations were received in eth, followed by USDT, btc, and BUSD.
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nft donations also increased in two years. Elliptical bitcoin-donations-surge-amid-russian-war.html” target=”_blank” rel=”noopener”>says
UkraineDAO Ukrainian Flag nft | Fountain: nft-fundraising#:~:text=Besides%20a%20high%2Dprofile%20donation,just%20under%20%2410%2C000%20coming%20second.” target=”_blank” rel=”noopener”>Elliptical
Although the crypto portion is relatively small compared to the billions of fiat donations, we have most likely witnessed the most significant increase in crypto donations in history. Cryptocurrencies are best suited for international fundraising thanks to their decentralized nature and resistance to censorship.
Cryptocurrencies were collected but not used as a means of payment. Because?
During the first days of the war, I was in contact with the Ukrainian Ministry of Digital Transformation with an urgent query to convert donations collected in cryptocurrencies into EUR to proceed with humanitarian aid purchases. Together with CoinsPaid, we did it quickly, but the fact that we needed to do it in the first place when crypto payment adoption was on the rise left me a little baffled. Why, in times of disruption, when rapid reaction is valued above all, is it still necessary to turn to traditional financial instruments and add another step to the process of purchasing critical supplies?
You're lucky if you can find someone to convert cryptocurrency for you, but digital currency donations haven't just been collected by the government. Many smaller and volunteer funds raising financial aid for separate brigades also accepted cryptocurrency and needed to convert it to fiat money for future purchases. The situation worsened in bitcoin.com/crypto-exchanges-binance-and-kuna-suspend-card-transactions-in-ukrainian-hryvnia/” target=”_blank” rel=”noopener”>March 2023, when Binance, Whitebait, EXMO and Kuna announced that they would temporarily suspend bank card operations in Ukrainian hryvnia. The issue occurred after the National Bank of Ukraine imposed restrictions on P2P and A2C operations for financial companies that allow deposits and withdrawals for crypto exchanges. As a result, Ukrainian cryptocurrency users, including smaller funds and individual volunteers, were deprived of the opportunity to trade digital currencies.
Difficulties with cashless transactions in hryvnia were related to attempts by Ukrainian authorities to combat tax evasion and money laundering on gambling platforms. Withdrawals to bank accounts are not yet available in Ukraine, although crypto exchanges are trying to solve the problem. At some point, withdrawal to Visa/Mastercard reappeared on EXMO, while the withdrawal fee amounted to 7%. As cryptocurrency donations to Ukraine continue to increase, the issue of appropriate use of the funds raised remains unaddressed both in Ukraine and abroad.
The adoption of crypto payments needs a clear regulatory framework
The adoption of crypto payments in times of war would eliminate third-party intermediaries, ensuring faster circulation of cryptocurrencies and the purchase of critical supplies. However, without a clear regulatory framework, we cannot even come close to that. In Ukraine, the use of digital currencies as a means of payment for goods or services is officially crypto-assets/ukraine” target=”_blank” rel=”noopener”>forbidden. It completely blocks the development of the crypto payments industry and imposes severe restrictions on the further use of crypto donations.
Regardless of the government's attempt to develop regulations during the first month of the war, Ukraine's draft Law “On Virtual Assets” of March 17, 2022 had long been under consideration by Parliament and then officially rejected in 2023. In April 2023, in light of the upcoming MiCA regulations and Ukraine's candidate status for EU accession, there was a second attempt create a regulatory framework for the Ukrainian crypto market that would address the issue of taxes first of all.
Currently, the government is more focused on forcing cryptocurrency users to pay taxes rather than making cryptocurrency donations work here and now. Obviously, one of the most promising and necessary implications of cryptocurrencies in wartime remains blocked due to the lack of clear regulations in Ukraine. In the EU, where the crypto payments industry is evolving most rapidly, there is still a need to bridge the gap between the cryptocurrency industry and traditional finance. The MiCA regulation will be able to address this by helping to restore confidence in the industry and ensuring maximum protection and smoother service delivery for traders across the EU.
Some final words
Cryptocurrency donations play a crucial role in the Ukrainian war, but the restrictions imposed and the lack of clear regulations make it almost impossible to use cryptocurrencies as a means of payment. The additional step, which is quite time-consuming under the circumstances, is always necessary to proceed with purchases. If it were not for this step, we could react faster, from the first days of the war.
Additionally, we would ensure proper transparency for supporters who can track whether their money was actually used as intended. Both timeliness and transparency are vital to continuing to raise financial aid in cryptocurrencies and avoiding the paradox of digital assets accumulating in wallet addresses and not being spent quickly and efficiently.
