How Bitcoin And A Crypto Exchange Became Part Of Ukraine’s War Effort

The founder of Ukraine’s largest cryptocurrency exchange, Kuna, has been sleeping only a few hours a day since Russia invaded his country.

Cryptocurrency trading on Kuna has surged since the start of the war. The surge is, in part, a consequence of the strict capital controls put in place by Ukraine’s central bank: limits on ATM withdrawals, restrictions on the country’s official e-money system and suspension of the foreign exchange market. But the cryptocurrency and the kuna also provide a vehicle for foreigners to donate to Ukraine, raise funds for the government and relief efforts.

Michael Chobanian operates Kuna from the western part of Ukraine after leaving Kyiv. He said he had moved his staff and the infrastructure of the exchange out of the country before the invasion. Mr. Chobanian spoke to the Wall Street Journal via recorded messages to save time. For the moment, everything is done on an ad-hoc basis.

“That’s the reality I have to live in,” Mr. Chobanian said.

The Ukrainian government and private aid groups have raised around $51 million in crypto through more than 89,000 donations since the invasion began last week, according to analytics firm Elliptic. Most of this was coordinated by Mr. Chobanian and Kuna.

On Kuna’s homepage for a fund he set up to accept donations, it says, “Let’s stop the war. Peace be. In crypto we trust, for Ukraine we pray.

Crypto donations have helped fund military hardware, medical supplies and other goods, Elliptic said.

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While activists, politicians and even terrorist groups have used cryptocurrencies to raise funds in recent years, it has never been done by a national government, said Elliptic co-founder Tom Robinson. .

The amounts aren’t large compared to other funding sources — the Biden administration has offered to send $6.4 billion in aid and Ukraine raised $270 million in bonds on Tuesday to help fund his war efforts — but it shows crypto has a role to play, he said. .

“It demonstrates that money can be raised directly from individuals around the world, for humanitarian aid or to directly fund a war,” Robinson said.

Relying on technology is not out of place for the Ukrainian government, which has tried to boost its economy with the tech industry in recent years. The country launched an official government e-money system and created a Ministry of Digital Transformation. It was this ministry that asked Kuna to start the crypto fundraising effort, Chobanian said.

Since Russia invaded Ukraine in late February, the United States and allied countries have imposed heavy sanctions on Russia. The WSJ’s Shelby Holliday explains how these sanctions affect everyone from President Vladimir Putin to ordinary Russian citizens. Photo: Pavel Golovkin/Associated Press

“Cash is useless because it’s physical,” Chobanian said. Carrying cash is also dangerous in a war zone, he said.

Most people, he said, use credit cards or IBAN, the international bank account numbering system used by banks. Cryptocurrencies work well for large payments and international payments, Chobanian said.

Crypto transfers are particularly fast compared to traditional methods. Transactions settle in about 10 minutes for bitcoin, for example, after which the money is transferred. In concrete terms, this means that the donated money is available almost immediately.

Kuna converts crypto into other digital currencies or fiat currencies for bank accounts. Some of the supply companies that Kuna brokers purchases for, Chobanian said, accept payments directly in crypto. In some cases, they walked companies through the steps to do so.

“Because many companies want to help us more than just make money, they are starting to accept crypto for us,” Chobanian said.

The donation fund accepts a range of cryptocurrencies: bitcoin, ether, tether, litecoin, dogecoin and around twenty others. Gavin Wood, the founder of a blockchain-based platform called Polkadot, tweeted that he would donate $5 million if they created a Polkadot address. Mr. Chobanian did so a few hours later. Mr. Wood made the donation.

The Ukrainian government alone has collected $31.5 million in crypto donations and spent $17 million so far, according to an update on Wednesday Chobanian shared on his Twitter account.

Ukrainian and American officials have expressed concern that the Russians could use cryptocurrencies to evade sanctions. Over the weekend, Ukrainian Deputy Prime Minister Mykhailo Fedorov asked crypto exchanges to block Russian users, which none of the exchanges agreed to do. So far, there has been no evidence supporting a large-scale Russian effort to avoid sanctions using cryptocurrencies.

Members of Ukrainian territorial battalions train with newly received weapons in Kyiv, Ukraine this week.

Photo:
GLEB GARANICH/REUTERS

Write to Paul Vigna at [email protected]

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How Bitcoin And A Crypto Exchange Became Part Of Ukraine’s War Effort


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