How Ukrainians raise money in cryptocurrency

More than $15 million worth of cryptocurrency has been donated to Ukrainian groups since Russia on Feb. 24, according to research firm Elliptic. Decentralized Autonomous Organizations (DAOs) have been established to support Ukrainians. NFTs have been sold to raise money for the Ukrainian people and military. The country’s official Twitter account has said it accepts Bitcoin, Ether and Tether.

Such donations are usually made the old-fashioned way: through banks. In tech-savvy Ukraine, crypto has emerged as a quick and easy way to handle this money. It’s not just money pouring into the country either – stablecoin Tether should 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 writing.

“If you’re from Ukraine, it’s very normal to have stacks of dollars in physical proximity,” said Illia Polosukhin, a Ukrainian co-founder of NEAR Protocol, a competitor to Ethereum. He has relatives in Kharkov who were bombed as we spoke. “You don’t trust the local currency and, moreover, you don’t trust banks.” That makes Ukraine a natural place for cryptocurrency adoption.

Ukraine is known for its technical talent, with more than 200,000 technical employees, and its IT export business had revenues 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 Ukrainians fraud protection. (In the past, crypto existed in a gray area where people could transact, but companies and exchanges that did so caught the attention of the police.)

The country ranks fourth on Chainalysis’s Global Crypto Adoption Index, behind only Vietnam, India and Pakistan, and approximately $8 billion worth of cryptocurrency passes through the country annually. “The big idea is to become one of the best jurisdictions in the world for crypto companies,” said Alexander Bornyakov, the deputy minister of the Ukrainian Ministry of Digital Transformation. The New York Times last year.

When Polosukhin was in Ukraine last year, he was surprised to see that crypto was widespread even among people not working on crypto projects. He noted that Tether is especially popular, in part because so many Ukrainians were used to working with the dollar as a reserve currency. There was another factor: the relative lack of investment opportunities. Besides the real estate market, “the only other option to invest is actually crypto.”

That could explain why so many cryptocurrency and Web3 advocates have gathered across the country since the Feb. 24 invasion. While there are concerns that Russian companies could also use cryptocurrency to evade sanctions, the Bank of Russia has pushed for a ban on cryptocurrencies. (It prefers the digital ruble instead.) So when Ukraine’s central bank suspended digital money transfers and limited cash withdrawals, crypto — in addition to the dollar, gold and silver — became a viable option for making transactions.

Broadly speaking, the international crypto community has responded with messages of support for Ukraine. Vitalik Buterin, creator of Ethereum, tweeted that the invasion was “a crime” against the Ukrainian and Russian people, adding “Glory to Ukraine”. Later, Buterin retweeted an announcement from Unchain.fund, focused on humanitarian aid† Nine people have to sign that the funds are distributed; NEAR’s Polosukhin is one of the signatories† After we spoke, Polosukhin sent me a document with ways to donate.

It’s not just Polosukhin. A member of the Russian performance art group Pussy Riot founded UkraineDAO to “use the power of web3 technology and community to raise funds”. There is also RELI3F, “a humanitarian aid initiative founded by NFT/web3 artists working together to support the people of Ukraine.” On Twitter, the CEO of the cryptocurrency exchange FTX 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 US since 1988, is working with developers from PieFi on Ukraine United DAO. “Everyone is kind of working together to think of ways they can help,” she told me. “It really restores your confidence in how people, the community and technology can do so much.” One of the goals of the DAO: to create peer-to-peer mesh networks to maintain Internet connectivity even if centralized Internet service providers go out of business.

“The missing link is trying to figure out what people need on the ground,” Muchnik says. She thinks blockchain technology will make it easier to ensure that the money raised for Ukrainians actually ends up where it belongs. She now understands from people on the ground in Ukraine that people are withdrawing money from their bank accounts and trying to find alternative 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 the organizations that are emerging. The blockchain also ensures that the money flow is traceable; anything unused can be returned.

Oleksii Stoiko runs a popular Telegram channel in Ukraine about cryptocurrency, which he created after being inspired by Bankless, a media organization focused on crypto. It exploded in popularity about a year and a half ago, he told me from his home in the west of the country. Unsurprisingly, Ukrainians have switched to crypto. “Ukrainians are natural when it comes to coordination,” he says.

On February 24, Stoiko felt too scared to leave his home, even though there were no Russian troops around. “It’s actually pretty scary,” he says. Just before he and I spoke, he reinforced the windows in his apartment with duct tape.

When we met on the 25th, things in Stoiko’s neighborhood were mundane, except for the empty shelves in large supermarkets—the most popular foods are all gone—and a lot of people running around with suitcases. But the reach of 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 Ukrainian people,” he says.

Polosukhin’s focus now is on making sure those in need are taken care of – 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 the power goes down. When we spoke, only mobile carriers in Kharkiv were working, and Polosukhin wasn’t sure when they would fail as well. For those who had it, cash was still the best strategy.

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