The war accelerates the regulation of cryptocurrencies

Ukraine has fully legalized cryptocurrencies, partly to finance its defense against Russia, but are the two countries really enemies when it comes to shady financial transactions ?

Ukraine has moved ahead and fully legalized cryptocurrencies. This new policy was ratified by the Ukrainian government since the country has received millions of dollars worth of cryptocurrency in support of its invasion by the Russian forces.

Quite interestingly enough, the bill allowing cryptocurrencies in Ukraine was approved by the country’s parliament in mid-February 2022, so the initial idea of legalizing cryptocurrencies could not have come as a result of the Russian agression, unlike what many news outlets are announcing. It just happened that, as Ukraine was working on a bill to legalize cryptocurrencies, a major conflict with Russia precipitated the circulation of cryptocurrencies by the millions.

Meanwhile, yesterday, the US Senate has introduced a bill (The Digital Asset Sanctions Compliance Act) to sanction cryptocurrency firms that let Russian companies use their cryptocurrency or trading platforms. The law may not be effective immediately, but knowing that it is in the making may force many crypto-actors to take the necessary measures to avoid an overnight blockade. It is believed (while it is impossible to prove) that economic sanctions on Russia may remain sterile because Russian institutions vastly use cryptocurrencies to move their assets around anonymously.

Who sends cryptocurrency by the millions to Ukraine ? Impossible to say. And who are the exact recipients of those crypto-donations ? Impossible to say as well. While the press suggests an amount, $54 million / maybe a $100 million, to evaluate the actual crypto-generosity phenomenon towards Ukraine, no one can precisely identify who it comes from and who it benefits. “Government officials” may be the recipients of those donations, but that information remains pretty vague.

As a reminder, cryptocurrencies have lost their safe haven status since the Russia-Ukraine war started. The values of Bitcoin, Ethereum, Solana, … have plunged 8% and more in the first hours of the conflict. Other non-crypto currencies were similarly affected, and only gold experienced a value surge, topping at a $2000/ounce.

Flowing more cryptocurrencies into Ukraine may not be such a smart move either. By the end of 2020, Ukraine, Russia and Venezuela were identified as the major holders of cryptocurrencies in the world (Ukraine holding the number 1 position). Ukraine has acted as a rotating plate to whitewash money from criminal activities through cryptocurrencies exchange platforms. Ukraine has never been the poor child of cryptocurrency, and legalizing it may be good news for its Russian, crypto-rich counterpart. Ukraine can play on both sides now, by receiving huge crypto-amounts from Western allies to defend itself against the Russian invader, and act as the Russian cryptocurrency exchange interface for worldwide unsanctioned transactions. Beautiful!

Update 23/03/2022: Dmitry Peskov, spokesperson for the Kremlin, denied any intention to lead cyberattacks on against US or EU infrastructures, stating that Russia doesn’t engage in “state-level Banditry”.