How crypto donations became Ukraine’s financial lifeline, and what it means for the future of money

The anti-Putin art collective Pussy Riot is helping coordinate the UkraineDAO, a new type of virtual organization enabled by this technology, which has raised over $6.5 million. But this is not just the work of grass-roots organizations: The government of Ukraine’s official Twitter account tweeted “stand with the people of Ukraine. Now accepting cryptocurrency donations. Bitcoin, Ethereum, USDT” (for USD Tether, a stablecoin). Ukraine has since added other support for other crypto assets and even announced an airdrop in what is a first for any country (typically an airdrop is a token reward for contributors to a blockchain project). Donations have flooded in: According to blockchain analytics company Elliptic, the Ukrainian government alone has so far raised more than $30 million. 

This should not surprise us: Stuck between two worlds, many Ukrainians have embraced crypto assets as an alternative. Ukraine ranks fourth, well ahead of the United States, in the Chainalysis Global Crypto Adoption Index, which measures a number of factors around crypto use. Ukraine’s young president, Volodymyr Zelenskyy, has won plaudits for his bravery and leadership on the ground and deserves equal praise for his total command of the information war online. With clear control of the narrative, Zelenskyy has boosted the morale of his troops and galvanized the free world to his cause. Engaging with the global crypto community is another shrewd move from a media-savvy politician who understands the memes of our age and the determination of his people. 

Why are so many people donating money in crypto specifically? First, it is simple to do. It took me about two minutes to donate to the government of Ukraine and the UkraineDAO fundraiser on PartyBid. Second, the crypto community is generally quite against government overreach—and this invasion is beyond the pale. My hope is that crypto naysayers in business and government will see the value of crypto in defending the Ukrainian democracy and rethink the role of crypto in a world of increasing political and climate crises.

Ultimately, these donations are possible only because Bitcoin and other crypto assets are peer-to-peer digital bearer assets that are censorship-resistant. There are countless reasons to use censorship-resistant money, and the list continues to grow. Last month, Canada’s so-called Freedom Convoy protesters were using crypto assets to crowdsource their movement after GoFundMe and other intermediaries deplatformed them. Many disagreed with the actions of the protesters in Ottawa and vilified Bitcoin as a result, calling it a tool of the alt-right and nothing else. The same groups seem to have less to say about Bitcoin, now that its users are funding Ukrainian freedom fighters. 

People can also use censorship-resistant currencies to avoid capital controls and destabilize local fiat currencies, which is why the government of China has outlawed them and the central bank of Pakistan wants to ban them. In emerging markets, leaders fear that Bitcoin will replace local currencies, thus weakening the local currency and destabilizing the government. In economics, this displacement is known as “dollarization” because, for most of the past century, these same markets feared that the U.S. dollar would replace the local tender. This will become a growing concern for political leaders as the asset class continues to grow.

This has caused some leaders like Christine Lagarde, president of the European Central Bank, to worry that Putin and his oligarchs can use Bitcoin, now that the West has restricted the Russian central bank’s access to the SWIFT payment messaging system. Lagarde used the news of new sanctions to reiterate her calls for stricter crypto regulations.

This argument has three main faults. First, it gives crypto assets too much credit. They are a large and liquid market, but not yet big enough or widely held to replace SWIFT or U.S. dollars, at least according to the Treasury Department. Second, to convert to large amounts of dollars, we need on-ramps and off-ramps such as centralized exchanges, which are now becoming the focus of sanctions, thus limiting their usefulness. Third, crypto assets would have to be not only censorship resistant, but also fully anonymous, which they are not. Banks and governments can simply block Russian wallet addresses; indeed, the crypto exchange Binance said that it would freeze the accounts of Russian clients under sanction. For this reason, criminals rarely use Bitcoin, and I expect Putin won’t either. 

Crypto assets are for everyone—for right and left, for rich and poor. For liberal and conservative, for banked and unbanked. These digital assets can give voice to the marginalized or can amplify the mainstream. They can help people we agree with and people we disagree with. That doesn’t make them good or evil—it makes them free.

Alex Tapscott is managing director of the Ninepoint Digital Assets Group (a division of Ninepoint Partners LP) and coauthor of Blockchain Revolution. This article is for information purposes only and should not be relied upon as investment advice. The author or his employer may have investments in some of the companies mentioned.