{"id":16560,"date":"2022-02-25T10:32:11","date_gmt":"2022-02-25T10:32:11","guid":{"rendered":"https:\/\/mailinvest.blog\/index.php\/2022\/02\/25\/one-key-variable-in-the-russia-ukraine-war-cryptocurrency\/"},"modified":"2022-02-25T10:32:11","modified_gmt":"2022-02-25T10:32:11","slug":"one-key-variable-in-the-russia-ukraine-war-cryptocurrency","status":"publish","type":"post","link":"https:\/\/mailinvest.blog\/index.php\/2022\/02\/25\/one-key-variable-in-the-russia-ukraine-war-cryptocurrency\/","title":{"rendered":"One key variable in the Russia-Ukraine war: cryptocurrency"},"content":{"rendered":"

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\u201cBecause there is no central controller who can impose their morals on its user, crypto can be used to crowdfund for the Ukrainian army or help Russia evade sanctions,\u201d said Tom Robinson, chief scientist and co-founder at the crypto analytics firm Elliptic.<\/a> \u201cNo one can really prevent it from being used in either way.\u201d<\/p>\n<\/div>\n

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But how much it could truly influence the war remains to be seen. Donations of a few hundred thousand dollars in bitcoin, while symbolic, may not mean much for a Ukrainian army that received<\/a> $650 million in weaponry from the United States last year and is still severely outnumbered.<\/p>\n<\/div>\n

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Russian crypto activity has historically paled in comparison to the transactions processed by its traditional financial institutions. Russian sources collected about $400 million worth of cryptocurrency from ransomware attacks last year, 74 percent of the global revenue from the crime, according to a recent study by Chainalysis, the blockchain data firm.<\/a> Yet those sums represent only a tiny fraction of the $46 billion in foreign exchange transactions that the U.S. Treasury Department says Russian financial institutions process every day.<\/p>\n<\/div>\n

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\u201cThe challenge for the Russian economy and individuals, in this context, is the immaturity of crypto as part of their financial system doesn\u2019t allow them at scale to circumvent the multinational sanctions being imposed,\u201d said Juan Zarate, a former assistant secretary of the Treasury and deputy national security adviser in the George W. Bush administration. \u201cIf this were happening five years from now and there was greater infrastructure, adoption and volume, it might be a different story. But that\u2019s not the current reality.\u201d<\/p>\n<\/div>\n

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Both sides have deep roots in crypto. Chainalysis ranks<\/a> Ukraine as the top European adopter of cryptocurrency and the fourth biggest in the world. In September, the country legalized<\/a> crypto after years of murkiness, and its new Ministry of Digital Transformation has released video ads<\/a> recruiting tech start-ups that could include crypto.<\/p>\n<\/div>\n

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A host of Western crypto activists put out a pro-Ukraine call for donations shortly after Russia launched an attack Thursday. Ryan Selkis, the founder of crypto firm Messari, tweeted<\/a>, \u201cOne of the best things we could do as an industry is figure out how to support the Ukrainian people and their resistance with crypto contributions.\u201d<\/p>\n<\/div>\n

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Austin Cain, who ran the group of crypto investors that tried to buy the Constitution<\/a>, asked followers to \u201crally to save lives in Ukraine. Would love to jam and share ideas \u2026 ping me if interested.\u201d<\/p>\n<\/div>\n

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In a message to The Washington Post, Cain said the activists were digitally convening to figure out their next moves.<\/p>\n<\/div>\n

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Late Thursday, Sam Bankman-Fried, chief executive of crypto platform FTX, said on Twitter<\/a> that \u201cwe just gave $25 to each Ukrainian on FTX.\u201d He did not immediately respond to a request for elaboration.<\/p>\n<\/div>\n

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In Ukraine, Vitaliy Deynega, an IT worker in Kyiv who founded a nongovernmental organization called Come Back Alive, has raised $400,000 in cryptocurrency since the war began to buy medical and military supplies for the army, according to Elliptic. Crowdfunding for global causes is not new, but crypto makes it easier to transfer the funds, which are not subject to the same hurdles as traditional bank transfers.<\/p>\n<\/div>\n

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Russia, meanwhile, has established itself as a hub for illicit crypto activity, including ransomware attacks and cryptocurrency-based money laundering, according to Chainalysis. Crypto businesses operating in Moscow City, the financial district of the Russian capital, pocketed $700 million worth of digital assets from entities linked to criminal activity over the last three years, Chainalysis found. That suggests a possible avenue for enterprises seeking to avoid sanctions.<\/p>\n<\/div>\n

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But it is unclear whether it will even be necessary. The sanctions<\/a> announced by the Biden administration are focused heavily on banks and do not cover energy payments, which means some of Russia\u2019s biggest businesses do not at the moment need to resort to a dark web of crypto payments.<\/p>\n<\/div>\n

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Even if they did, experts say, crypto would not be as inviting a place as it would seem.<\/p>\n<\/div>\n

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\u201cThe problem is the off-ramp. You could theoretically move all the payments you want, but until you can buy a burger down the street, there\u2019s not much you can do with the money,\u201d said Nick Furneaux,\u00b7managing director at the U.K.-based investigative firm CSITech<\/a> and author of the book \u201cInvestigating Cryptocurrencies.\u201d<\/p>\n<\/div>\n

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And U.S. authorities have demonstrated a growing sophistication in tracking and seizing illicit crypto funds, a fact that could further deter Russian interests looking for ways to evade the wave of new sanctions.<\/p>\n<\/div>\n

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The Justice Department this month announced that they seized $3.6 billion in bitcoin allegedly stolen in a 2016 hack of the crypto exchange Bitfinex. Last summer, the Justice Department recovered $2.3 million worth of bitcoin paid to Eastern European cybercriminals after they shut down the Colonial Pipeline in a ransomware attack that led to fuel shortages on the East Coast.<\/p>\n<\/div>\n

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\u201cThe oligarchs have so many well-heeled accountants and complicit bankers around the world, they don\u2019t really need to go that way,\u201d said Marshall Billingslea, a former assistant secretary of the Treasury Department during the Trump administration. \u201cAnd if they\u2019re investing in sound sanctions advisers, they\u2019re being warned that some of these blockchain currencies like bitcoin are not nearly as opaque as they might have thought.\u201d<\/p>\n<\/div>\n

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The Biden administration has been leaning on the crypto industry to take its own steps to block and report sanctioned entities. The Treasury Department in October published guidance reminding crypto companies that they are responsible for policing their own platforms and that slip-ups could lead to \u201cenforcement actions \u2026 and negative impacts on a company\u2019s reputation and business.\u201d<\/p>\n<\/div>\n

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Some Russian figures are also urging more internal oversight of cryptocurrency. In a televised meeting with Putin on Thursday, Alexander Shokhin, the head of the business group the Russian Union of Industrialists and Entrepreneurs, made the case to the Russian leader that for the sake of \u201cminimization of external financial risks,\u201d the government should \u201cinstitute effective regulation of digital financial assets and cryptocurrency.”<\/p>\n<\/div>\n

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Meanwhile, Coinbase, the largest U.S.-based crypto exchange, said it is making a number of moves as the crisis in Ukraine unfolds, including blocking IP addresses in sanctioned areas and working with intelligence analysts to monitor \u201cthreat actors and their networks,\u201d a company spokesperson said in an emailed statement. \u201cWe remain vigilant to ensure we are playing our part and meeting our obligations in the context of this rapidly evolving conflict.\u201d<\/p>\n<\/div>\n

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Elliptic\u2019s Robinson, however, noted creative uses of crypto countries under sanction. He said Iran has been able to put its oil reserves to use by repurposing it to mine energy-intensive crypto, potentially salvaging hundreds of millions of dollars.<\/p>\n<\/div>\n

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\u201cCryptocurrency mining provides a way for Russia to monetize its oil and gas reserves on the global market even if it isn\u2019t able to physically export them,\u201d he said.<\/p>\n<\/div>\n

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Jeremy B. Merrill and Jeanne Whalen contributed to this report<\/i><\/p>\n<\/div>\n<\/div>\n