Ukraine-Russia Conflict Overview: Western Sanctions, Aid from Various Sectors, Cryptocurrency as a Potential Double-Edged Sword

Although Western countries have not directly intervened in the war, they have imposed various sanctions on Russia as the conflict between Ukraine and Russia escalates. Cryptocurrencies seem to have played a role for both sides. This article compiles information on blockchain, cryptocurrencies, and their relevance in the Ukraine-Russia conflict.

Western Sanctions Imposed

According to previous reports, the United States, the United Kingdom, and the European Union have imposed the following sanctions on Russia:

• The EU simultaneously sanctioned Belarus.
• The U.S. froze $630 billion in assets of the Russian Central Bank.
• Apple Store removed the PSB App of the Russian Industrial and Commercial Bank.
• Apple Pay and Google Pay ceased support for sanctioned banks.
• The EU and European countries closed their airspace to Russian aircraft and banned Russian state media from broadcasting within the EU.

Exclusion from SWIFT System

On 2/26, the EU and the U.S. issued a joint statement announcing the removal of specific Russian banks from the SWIFT system, ensuring these banks are disconnected from the international financial system and damaging their global operations.

However, as reported earlier, back in 2014 during the Crimea crisis, countries threatened Russia using SWIFT, prompting Russia to develop its domestic financial messaging system, SPFS, as a backup. Russian Central Bank Governor Elvira Nabiullina also claimed that SPFS would operate smoothly.

Former U.S. sanctions official Richard Nephew believes:

This will have an immediate impact on Russia, but the country will also mitigate it through other measures. I think the impact of excluding Russia from SWIFT has been exaggerated by the public.

As of now, the Russian ruble has fallen by 20% against the USD due to a series of sanctions. Russian Central Bank Governor Elvira Nabiullina has announced raising the key rate to 20% in response.

Role of Cryptocurrencies

Crypto Donations

On 2/27, Ukrainian Deputy Prime Minister Mykhailo Fedorov tweeted on the 26th, stating: "Ukraine accepts donations in Bitcoin, Ethereum, and USDT."

The founder of Polkadot reached out to the Ukrainian government:

Post your Polkadot address, I personally donate five million dollars.

Although Gavin Wood did not receive a response from the Ukrainian government, the Polkadot ecosystem has set up a Ukrainian donation fund to raise funds for Ukraine.

As of now, online data shows Ukraine has received 164.1 BTC, equivalent to $6.37 million, 2,347.2 ETH, equivalent to $6.44 million. Blockchain analysis firm Elliptic indicates that with some NFTs and other donations received by non-governmental organizations like Ukraine DAO, the total value of cryptocurrency donations has exceeded $20 million.

3/1 15:45 Update: The official Twitter account of Ukraine / Україна has added a Polkadot donation address.

Exchange Sanctions

Ukrainian Deputy Prime Minister Mykhailo Fedorov tweeted, urging major exchanges to indiscriminately freeze Russian crypto accounts, but the CEOs of various exchanges believe this goes against the essence of cryptocurrencies.

Coinbase, Binance, LocalBitcoins, and Kraken CEOs all find this action inappropriate and aim to minimize the impact on innocent users. A Coinbase spokesperson told Decrypt media:

Coinbase does not allow Russian users to register but does not restrict users from trading with Russian-related addresses and will comply with all sanctions in place.

Other measures taken across various sectors include:

• Binance: Binance will donate $10 million, and the BCF charity foundation has started fundraising.
• Arweave: Decentralized storage project Arweave urges users to record historical events on the blockchain.
• Flexpool: Ethereum's fifth-largest mining pool, Flexpool, announced the termination of services for Russian users.
• Starlink: Musk has responded to the Ukrainian Deputy Prime Minister's request, and Starlink's service terminal deployment in Ukraine is complete.
• Dmarket: NFT and metaverse game item trading platform Dmarket has frozen accounts of Russian and Belarusian users, with funds potentially used for Ukrainian defense purposes.

Crypto Community Updates

Despite becoming a means of donation, in the face of financial sanctions in Russia, cryptocurrencies seem to be a double-edged sword. Messari founder Ryan Selkis speculated on possible regulatory scenarios for cryptocurrencies and urged transferring crypto assets out of exchanges.

1. Russia is excluded from SWIFT.
2. Russia may legalize Bitcoin.
3. The U.S. will track Russia's Bitcoin activities as a result.
4. The U.S. will prohibit users from transferring to unknown wallets.

Ryan Selkis further stated:

Gold is for authoritarian states like Russia and China, while Bitcoin is suitable for Ukraine and Taiwan.

He clarified that he referred to governments and countries and emphasized that cryptocurrencies serve everyone, with authoritarian governments simply disliking cryptocurrencies.

Note: Ryan Selkis' statement about authoritarian states disliking cryptocurrencies seems somewhat contradictory to his assumption that "Russia may legalize Bitcoin."