The War Backfires: Russian Crypto-Market Cripples as Conflict Continues

From farmers toiling to buy fertilizers to people paying hefty amounts at the gas stations; from stores running out of cooking oil to nations reconsidering alliances, Russia’s invasion of Ukraine has triggered umpteen seismic repercussions. However, Beyond the rapidly expanding refugee crisis, the unprecedented sanctions, and the global relationship shakeup, lies a massive financial massacre with cryptocurrency at the heart of it.

The snowballing economic crisis followed by the Vladimir Putin-led nation’s attack on Ukraine has already impacted multiple sectors including energy, oil, food and agriculture, trading, foreign exchange, import, and export, among others. It is further expected that this conflict will shrink Russia’s economy by 11.2%

Additionally, It is believed that the nation’s 40-years-worth of effort in building a prosperous market-based economy, that began under Mikhail Gorbachev’s leadership, has failed miserably through Putin’s unprovoked war. Moreover, since the beginning of the war on February 24, 2022, more than 300 world-renowned brands have voluntarily halted services or dialed back their businesses from Russia, citing the conflict.

Besides playing a crucial role in this conflict, cryptocurrency is also an important tool for ordinary Russian citizens to resist financial totalitarianism. Hence the brunt has to be endured by both, the economy and the citizens of the nation. Here’s taking a glance at the aftermath of the feud upon the digital economy.

Russia’s Multi-Billion-Dollar Crypto Industry Crippled

Despite Russia being the world’s third-largest bitcoin mining hub, US officials targeted its bitcoin mining firm BitRiver considering it a potential threat to the efficacy of its sanctions regime. In detail, the officials showed concerns that the Russian government may monetize its vast oil and natural resources reserve with power-intensive crypto mining as a way to raise funds against the western sanctions.

The US officials disabled miners to access US crypto exchanges or mining equipment as a commitment to ensure that no asset becomes a mechanism for Putin’s regime to offset the impact of the sanctions.

The number of crypto users in Russia is also anticipated to degrade with the collapse of the Russian Ruble’s value, in spite of having above 17 million cryptocurrency owners/traders. Blanketing a market where more than 12% of citizens own cryptocurrencies (50% higher than the ownership rate among Americans),  with such a sanction would penalize everyone in the economy, by all measures

Furthermore, leading cryptocurrency exchanges like Binance and Coinbase have suspended thousands of accounts and wallets linked to Russia, suspecting illicit activities. Mastercard Inc and VISA Inc have blocked several Russian financial institutions from their payment gateway and recently, multiple Russian banks have been removed from the Society for Worldwide Interbank Financial Telecommunications (SWIFT) by the UK, the US, European Commission, and several other EU states.

Ukraine Receives Sympathy in the Form of Cryptos

Ukraine has raised over $60 million in crypto donations since the beginning of the invasion. More than $10 million was donated directly to the crypto wallets after the Ukrainian government solicited donations in bitcoin, Ethereum, and tether.

Ukrainian President, Volodymyr Zelenskyy has signed a virtual assets bill that will recognize cryptocurrencies as an asset in the country after the war gets over.