Ukraine’s trading volume remains strong despite crypto ban

With the ongoing Russia-Ukraine conflict lasting more than six months, market data from Kaiko shows trading volumes for the Ukrainian hryvnia (UAH) remain strong. This comes as residents of the war-torn country increasingly turned to digital assets in a bid to secure their wealth.

NBU ban not enough

The first increase in Ukrainian hryvnia (UAH) cryptocurrency trading volume after Russia’s invasion prompted the country’s apex bank (NBU) to ban crypto transactions in the local currency. This was done to stop outflows of currency and help stabilize the falling currency in the face of the conflict. Despite the desired effect, all indications show that crypto transactions in hryvnia remain robust.

The chart above provides a detailed overview of the hryvnia’s trading volume. Before the invasion, daily volume was below 100 million as Ukraine traded more in crypto assets than in fiat currency, according to a triple-A report. However, the outbreak of the invasion led to an increase in trading volume, which increased to almost 400 million UAH as crypto donations poured into Ukraine.

With trading volumes still high above the UAH 200 million level, Ukraine’s top bank issued the ban in April. This caused the registered trading volume to fall below UAH 200 million. Since then, it has continued to trade between UAH 100 and 200 million with occasional peaks above it.

Accordingly, the increase in daily trading volume was driven by the growing demand for the Tether stablecoin. USDT-UAH tripled on average since January, rising faster than BTC-UAH trades. Today, Tether trades dominate UAH-denominated transactions, indicating interest in the stablecoin amid the local currency’s sharp weakening and currency market disruptions.

Furthermore, in order to stem inflation and stabilize the country’s financial system, the NBU has kept the hryvnia exchange rate fixed against the US dollar. Despite this, the cryptocurrency market has continued to function, offering an intriguing case study of how decentralized markets can allow price discovery despite political constraints.

As shown in the chart above, while the NBU maintained a fixed exchange rate since February, the USDT-UAH pair saw a 40% increase in value. This shows that UAH continued to weaken against the US dollar. Accordingly, last week the NBU announced a new UAH exchange rate fixing USD 1 at UAH 36, a 25% increase from the previous peg. Nevertheless, the price of 1 USDT continues to diverge in the crypto markets.

Join our Telegram group and never miss a story about digital values.

Ongoing conflict is making crypto more prominent

The Russia-Ukraine conflict has seen digital assets take center stage as citizens from both countries turned to the growing to protect their wealth. The outbreak of the war saw more donations in crypto and from crypto companies flow into Ukraine’s defense efforts.

While Ukraine has received most of the attention, Russia has not been left out. Chain analysis revealed that pro-Russian paramilitary and volunteer groups had received nearly $2.2 million in crypto donations. However, this represents only 4% of the total sum that Ukraine receives to finance the war.

Similarly, Moscow has recently banned the payment of digital assets in Russia. The new legislation allows for various uses of Digital Financial Asset (DFA) payments, while prohibiting their use to pay for “products transferred, works performed or services provided”. However, Russia’s banking authority said it was open to accepting the use of digital assets for payments to foreign partners.

The idea of ​​using digital assets for international settlements has received positive feedback in Russia. This in light of the strict sanctions imposed on the Kremlin due to the Ukraine invasion. However, most Russian state institutions continue to support the ruble’s exclusivity as legal tender.

Overall, cryptocurrencies continue to see increasing use and adoption in Russia and Ukraine, while also showing how effective they can be in wartime. From being used to raise money, and secure wealth to showing the actual value of a country’s currency despite government policies. Ultimately, it appears to be truly “the people’s money.”

Do you think digital assets have proved significantly useful for global finance in light of their increasing adoption since the outbreak of war? Let us know your thoughts in the comments below.

About the author