Crypto Goes to War in Ukraine

Hey, everyone. Among the first signs of spring: a climate-change-induced increase in pollen and a rising new Covid variant. Can we have six more weeks of winter?

The Plain View

Sergey Vasylchuk knew trouble was afoot when Russian troops began gathering at the border. People assured him the massed armies were only a feint, but the CEO of Everstake, a Ukraine-based blockchain company, didn’t believe it. “I’m paranoid; I’m an engineer,” he says. He begged his employees to leave the country—Call it a vacation if you like, he told them, promising to pay for a retreat to a foreign sunny climate. Not everyone took the offer. Vasylchuk himself already had plans to travel to Florida to attend flight school, a passion of his. When the invasion came–two days after he arrived in the US–he worked from his stateside outpost to make sure his parents, who are still in Ukraine, were safe, and he did what he could for his employees. Some are now fighting the Russians. “My home is probably destroyed,” he says. He’s in South Florida indefinitely—not partying with fellow blockchain bros, but working “24/7,” he says, to help his country. With crypto.

“I can do only two things in my life—crypto and aviation,” he says. He chose the former, determining that the best way to serve his country was to supply it with funds via digital currencies. Not long after the invasion, he set up a DAO. That’s a decentralized autonomous organization, an entity whose trustworthiness can be verified by the reliable blockchain ledger. Vasylchuk partnered with the Ukraine Ministry of Information and a currency exchange called FTX to set up a system for the government to accept crypto currency directly from donors. So far the fund has taken in more than $65 million, which has been distributed between the country’s defense efforts and humanitarian aid. The effort is one of several using blockchain-based technologies to help Ukraine and its people during these nightmare weeks. Some have even dubbed this conflict the Crypto War.

It’s unlikely that those who have lost homes or loved ones would agree that crypto is the headline here. But the chaos of war often gives rise to alternative economies; in this case it’s not so much a black market (such as the one that helped rebuild the Japanese economy post–World War II), but one that rests on the unique virtues of crypto. Apparently Ukrainian president Volodymyr Zelensky recognizes this, as just this month he signed legislation that blessed key activities in the crypto sector, like currency exchanges and bank integration for crypto companies.

While the spoils of crypto are often enjoyed by privileged investors eyeing Lambos, the technology seems almost custom-made to surmount the challenges of a beleaguered Ukraine. “A bitcoin transaction takes 10, 20, 30 minutes versus a wire transfer that might take two or three days, and you can’t be sure of that—by then [the Russians] might have bombed a national bank,” says Illia Polosukhin, a cofounder of the blockchain company Near. Polosukhin is also one of the instigators of a DAO called Unchain, which has so far taken in $7 million for aid. In addition, these crypto funds accept donations anonymously, which is particularly advantageous for any potential givers with ties to Russia, whose leader is known to hold grudges. Finally, the idea of using crypto in this way is just plain attractive to those sitting on huge piles of bitcoin, ether, or other coins with insanely high values.

But maybe the most significant aspect of wartime crypto in Ukraine is how private currencies are nudging their way into everyday commerce. Because the banking system is shaky in Ukraine, some suppliers receiving coins aren’t interested in making the exchange from cryptocurrency into fiat. “It’s not clear what the exchange rate will be between US dollars and hryvnia [the national currency], and so having coins in crypto is beneficial,” says Polosukhin. Crypto might be particularly precious for those fleeing the country, who don’t want to travel with cash, or simply can’t get it from their bank accounts. For people remaining in the country, Polusukhn says, Unchain is working on the equivalent of a crypto ATM card, where people can buy supplies using their digital wallets.