Crypto activity explodes in Russia and Ukraine due to war, study shows

Crypto activity in Russia and Ukraine is escalating as fast and as loud as the missiles fired at each other in the face of an ongoing war between the two countries.

New York-based blockchain analytics firm Chainalysis published a study on the booming use of crypto — much of it illegal in nature — in Eastern Europe in an excerpt from its upcoming Geography of Cryptocurrency 2022 report.

The noticeable increase in activity among the citizens of the two countries started shortly after Russia invaded Ukraine in February.

As the war escalated, their economies began to suffer, pushing inflation up to suffocating levels.

Image: Vulcan Post

Russian crypto activity focused on Stablecoins

According to data from Chainalysis, stablecoins appeared to be the digital assets of Russians forced to endure economic sanctions imposed by various countries as a form of condemnation of the invasion.

The research firm said stablecoin transaction volumes in Russia increased from 42% in January to 67% in March. Since then, overall crypto activity in the country has also grown.

As Russia has been removed from SWIFT’s cross-border system as part of the broader sanctions, it has turned to digital currencies, particularly stablecoins, to process cross-border transactions.

The Russian people also resorted to exchanging their national currency, the ruble, for stable coins as they sought to protect the value of their assets during this period of conflict.

Image: e-Flux

Ukraine receives millions of Bitcoin donations

Ukraine’s crypto activity may be a little different compared to Russia’s, as the country’s digital wallets have been filled with bitcoin donations.

Blockchain analytics firm Elliptic revealed that the nation was able to raise $63 million worth of Bitcoin and other related currency donations in just two weeks after the invasion.

A 2022 Financial Times report earlier this year said that crypto aid to Ukraine has already breached the $100 million mark.

Ethereum co-founder Vitalik Buterin was also among the biggest donors to Ukraine, using the Tornado Cash mixing service and privacy tool to facilitate his donation.

Meanwhile, Illia Polosukhin, the co-founder of Near Protocol, shared that when he thought about how to help Ukraine, he first thought of digital currencies, thinking of them as a “lifeline.”

Polosukhin, speaking about Bitcoin and their benefits in such a situation, said:

“It’s resilient, it’s fast, it gives help directly to people,” said Polosukhin, talking about cryptos and their benefits in such a situation.

It’s no wonder why Ukraine’s crypto activity is on a steady rise compared to Russia’s.

Meanwhile, initial findings show that more than 18% of all crypto transactions in Eastern Europe are linked to potentially risky or illegal endeavors.

Interaction with high-risk exchanges, which often do not require users to submit know-your-customer (KYC) information, adds to the risk Eastern Europeans face.

High-risk behavior related to exchanges is likely to increase as a result of Russians being blocked from accessing European crypto firms due to sanctions.

One thing is for sure though, Russians and Ukrainians see virtual money as a means of survival while their countries continue to rule with missiles, bombs and guns.

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