Crypto’s humanitarian selling point in Turkey and Syria

Hello and welcome to the latest edition of the FT’s Cryptofinance newsletter. This week we ask if crypto donations really make a difference in times of crisis.

After the devastating earthquake that hit Turkey and Syria earlier this week, the crypto industry has tried to do its part by rounding up millions in donated tokens.

Blockchain records show wallet addresses shared by AHBAP, a local non-profit, have received more than $3 million in donations this week. Blockchain analytics firm Chainalysis estimates that more than $5 million in crypto donations have been sent to Turkey and Syria.

“Many people around the world want to help with cryptocurrency,” AHBAP founder and local artist Haluk Levent wrote on Twitter.

Chainalysis rival Elliptic has also crunched donation numbers, finding more than $10 million worth of crypto tokens pledged by a number of crypto firms, most notably Binance which has pledged a total of $5 million in donated funds.

In many ways, Turkey’s economic strife even before the earthquake means that the country is tailor-made to embrace crypto. An era of high prices and falling interest rates is playing into the hands of crypto evangelists who claim digital assets like bitcoin are a store of wealth and a hedge against inflation.

“If you ask people, they are so keen on crypto,” an Ankara local named Tolga told me. The FT’s new Turkey correspondent – ​​​​and my old boss – Adam Samson saw a coin shop in his first week in Ankara.

For an industry plagued by scandal, painting crypto as the best tool for financial relief in times of crisis is a great selling point. But is it true?

“You can’t use crypto in daily life,” Tolga explained, adding that locals have to convert their crypto to the Turkish lira and withdraw newly converted fiat to their bank account. Hardly the kind of economic gymnastics needed in the wake of a natural disaster.

Another local – who I will refrain from naming, but who traded cryptocurrencies before the earthquake – has struggled since the disaster to release funds from a popular exchange. “I’m really sad, I have nothing to do but wait [the exchange to help]”, they told me via Twitter.

“Some of our friends are under the rubble . . . we can’t hold back the tears.”

The intent on behalf of crypto’s advocates may be admirable, but the simple fact is that where crypto succeeds in enabling near-real-time transactions, it fails in the real world.

“If the goal is to get granny money quickly and easily, there is a strong economic case that a counter-trade exchange through a crypto-asset is not going to be cheaper than traditional mechanisms,” software engineer and crypto critic Stephen Diehl told me via text. “At the end of the day, the recipient doesn’t have much use for the bitcoin because they can’t use it.”

That doesn’t mean crypto can’t serve a humanitarian purpose. I would be remiss not to point out that more than $50 million in crypto tokens were donated to Ukraine’s war effort in the wake of Russia’s full-scale invasion last year.

Weeks after the invasion, Ukraine’s Deputy Minister of Digital Transformation Alex Bornyakov said crypto was “extremely useful” in send vital supplies to the armed forces. “Every single helmet and vest purchased via crypto-donations is currently saving Ukrainian lives,” he said.

That may be true, but before Christmas Bornyakov also told me that Russian use of crypto to avoid sanctions was set to become a “big problem”. So there are always two sides to the coin in cryptoland.

What is your view on crypto’s usefulness in times of crisis? Notify at [email protected]

Weekly highlights

• Another week, another crypto platform bites the dust. LocalBitcoins, one of the world’s oldest crypto exchanges, announced that it will discontinue its service after 10 years of activity. The company blamed the “ongoing very cold crypto winter” for the shutdown and apologized to users for “any inconvenience this may cause”.

• The bad news for crypto exchanges continues: late Thursday, Kraken ended its betting program for US customers and paid $30 million in a settlement with the US Securities and Exchange Commission. The settlement is the latest in a series of enforcement actions aimed at players the SEC says violated securities rules. Check out my story with Stefania Palma here.

• My colleague Joshua Oliver published a fascinating FT Magazine piece about the final hours of FTX, written during his recent trip to New York. Check it out here.

• Former Coinbase employee Ishan Wahi pleaded guilty to two counts of conspiracy to commit fraud. You may remember the 32-year-old’s case from last July, when the former product manager was charged with sharing tips about tokens to be listed on Coinbase. “Wahi is the first insider to plead guilty in an insider trading case involving the cryptocurrency markets,” said US Attorney Damian Williams.

• Days before the SEC cracked down on Kraken, the SEC laid out its priority for the coming year. Among other areas, the regulator pointed to emerging technologies and crypto-assets as a sector that could pose risks to investors or financial markets. This much is obvious to anyone who has followed crypto for more than a day, but if you thought the SEC was tough on this industry in 2022, my advice would be to buckle up.

Soundbite of the week: ‘Shameless’ crypto entrepreneur

Three Arrows Capital co-founders Su Zhu and Kyle Davies oversaw one of the highest-profile crypto collapses of 2022, not called FTX.

Earlier this year, both men announced a new exchange, called GTX. The idea behind GTX is to offer impatient people the chance to shop for bankruptcy claims before the slow wheels of justice settle claims for themselves. No, I’m not kidding.

Three Arrows’ liquidators, who have long complained about the co-founders’ unwillingness to engage in bankruptcy proceedings, criticized Davies for his latest project.

“Since January 5, 2023, Mr. Davies has been active on social media, having ‘tweeted’ or ‘retweeted’ dozens of times. . . Shamelessly shirking his obligations to his failed company, Davies has recently been active in an effort to raise tens of millions to launch a new crypto exchange.”

Data mining: A word about darknet market share

If you follow the ever-evolving nexus between cryptocurrency and crime, you’ll recognize the Hydra Market – at its peak the largest darknet market in the world.

Earlier this year, the US Department of Justice took action against the founder of Bitzlato, a little-known crypto exchange that allegedly served as a conduit for money laundering. Its largest trading counterparty, Hydra Market, was shut down in April last year.

Fresh data shared by Chainalysis shows that despite only having a third of the year to play with, Hydra crushed the competition.

Cryptofinance is edited by Philip Stafford. Send any thoughts and feedback to [email protected].

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