Key Highlights:
- Bitcoin as Weapon of War- Ongoing war in Ukraine;
- The role has Bitcoin played in Russia and Ukraine;
- The typical role Bitcoin has played in warring states,
- Bitcoin as a tool for mass emancipation.
Source: Google Images
I’m sure a full-blown war in Europe was not on the bingo card for most people, especially as the world seemed preoccupied with battling COVID-19 and the economic disaster it brought in its wake.
However, if the Russia-Ukraine war has taught us anything about Bitcoin (BTC), it is that this previously fringe idea holds real value and can be a powerful tool in times of war. Both Russia and Ukraine can and have, to some extent, used Bitcoin in different ways to further their interests in the ongoing war in the region.
War has Changed
As we know, war is a “last resort” conflict resolution tool invented by humans, where the winners dictate the terms moving forward. Being a human invention, war is prone to evolution and has done exactly that for the past few centuries. From the days of armies running towards each other in a kamikaze-like fashion to shelling enemy trenches to the use of armed drones and ICBMs, war has had a profound evolutionary journey.
Source: Leader’s Edge | Evolution of War
The latest evolution in this human invention sees a war being fought with money and finance. Because an all-out war with Russia by world powers could be catastrophic for the planet as a whole, the world powers have taken a more sophisticated approach that does not involve violence: economic sabotage or, in the case of Russia, sanctions.
Russia Circumventing Sanctions With Crypto?
After Russia invaded Ukraine in late February, several world powers initiated several stringent sanctions to bite Russia where they knew it would hurt the most—the economy. One notable sanction action against the European giant was cutting it off from the SWIFT international banking system.
Source: Reuters
This action has very damning effects on the Russian economy, immediately taking an aggressive toll on the Moscow Exchange (MOEX) and the Russian Ruble (RUB). But Russian authorities were quick to respond to these sanctions, with the Central Bank of Russia (CBR) increasing interest rates by twofold to 20% and mandating all local exporters to sell at least 80% of their foreign currency reserves.
Source: Skynews
While the Russian government has yet to use Bitcoin or crypto to circumvent sanctions, Russian businesses have reportedly engaged in the act. In fact, the government can be said to have endorsed this practice on several occasions.
For instance, a Kommersant report in September showed that Russia’s central bank and Ministry of Finance had penned a legislative agreement to allow the use of cryptocurrency in cross-border payments by businesses. Also, in a previous report, we noted that Russia was working on launching a native cryptocurrency exchange, mainly for crypto taxation purposes.
That said, it’s easy to imagine Russian businesses and banks using Bitcoin to move funds around the world. A similar case of this was seen in 2018 when Iranian businesses turned to Bitcoin to bypass former US sanctions. There’s also the unpopular case of North Korea using cryptocurrencies to fund its military expeditions.
Source: Elliptic
Describing the useful properties of cryptocurrencies in times of crisis, Vadym Synegin, co-founder of crypto solutions provider Tecor, said:
“With most markets controlled by centralized authority figures that can easily buckle under political tensions, the crypto markets remain more or less decentralized, meaning that their operational efficiencies during periods of crisis are further enhanced.”
Bitcoin used as Weapon of War in Ukraine
On the other end, there was Ukraine, which turned Bitcoin into a very helpful tool. The ongoing Russia-Ukraine conflict displayed the usefulness of Bitcoin and crypto in fundraising. Because of its nature, BTC could be raised on the fly and deployed easily to areas where it was needed.
In Ukraine, the government set up the Crypto Fund of Ukraine, a crypto donation portal, in the early stages of the war. As of early November, the program had raised over $100 million in Bitcoin and other cryptocurrencies for numerous humanitarian and military purposes.
Source: Google Images | Crypto Fund of Ukraine
Bitcoin for the People
Apart from being a useful tool in the hands of governments or sovereign states, Bitcoin can also be of value to people in war-ridden regions.
Regular, or fiat, money is known to always be badly hit in times of war. For instance, ATMs stop dispensing cash, banks are restricted from facilitating withdrawals, and exchanging foreign currencies becomes a struggle.
In worse situations, such as a full-blown war, the banking system shuts down altogether. Cash surrogates such as coupons and gift cards become some of the only means to get essentials, causing uncertainty and inflation to become the order of the day.
Not surprisingly, situations like this are where Bitcoin and cryptocurrency thrive, thanks to their decentralized and permissionless nature. In theory, a stable, secure, and decentralized payment method such as Bitcoin can exist in any political climate.
Take the persistent hostilities between the Israelis and the Palestinians in East Jerusalem, Gaza, and the West Bank, for example.
Palestinians are the most affected by these conflicts, especially the Palestinians occupying the blockaded enclave of Gaza. However, Bitcoin and crypto made it possible for many of them to keep their financial activities going and become emancipated from the financial controls of the Israeli government.
Source: Google Images
Highlighting the use of crypto along the Gaza Strip from a survey, the National News noted:
“With Israel limiting trade and access, a growing number of residents are turning to cryptocurrencies to make a living—despite the risks.”
Final Word
The way we utilize Bitcoin is entirely up to us; it is merely a tool. It has the ability to bring out the best and worst in people, much like the internet, social media, and any other modern technology. Even if Russia does utilize Bitcoin to circumvent sanctions, it remains a tool for progress, equity, and freedom.
Finally, Bitcoin has been seen to play critical roles in times of crisis and war, such as in Russia, Ukraine, Iran, and North Korea, highlighting that this technology and controversial payment method is here to stay.
