It has been two weeks since Russia began its first large-scale military action in Europe in the 21st century – the so-called “special operation” in Ukraine. The immediate military conflict caused devastating sanctions on the Russian economy from the United States, the European Union, and their allies and has placed the crypto industry in a position of both ease. being hurt and requires many difficulties.
As the world watches closely, the crypto space must prove its own position as a mature and financially responsible community and it must challenge accusations of being a shelter. Safe haven for war criminals, dictatorships and oligarchs to be punished. Up to this point, things have gone relatively well. But despite reassurances from industry opinion leaders, some experts say the decentralized nature of cryptocurrencies could seriously jeopardize this endeavor.
In the midst of a wave of support for Ukraine from people, organizations and governments around the globe, the country has set an important precedent. On February 26, the third day of the Russian military campaign, the Ukrainian government announced that it would accept donations via cryptocurrency. It made a statement on Twitter and listed Bitcoin (BTC), Ether (ETH) and Tether (USDT) wallet address. It comes as the formal approval of an earlier similar announcement from the nation’s 31-year-old, digitally savvy deputy prime minister, Mykhailo Fedorov.
The idea of a suffering European country officially accepting digital assets from people willing to lend an open hand sounds so shocking. Vitalik Buterin initially doubted the veracity of the claim. But Tomicah Tillemann, a former senior adviser to two US secretaries of state, confirmed validity of the wallet, quotes a former Ukrainian ambassador. The Kyiv Kuna Exchange-based cryptocurrency exchange brings together and manages the infrastructure for donations.
Blockchain analytics company Elliptic has estimate that these wallets and those of another Ukraine-related initiative called “Come Back Home,” received $63 million in crypto as of March 9. The funds came from more than 120,000 individual donations.
Sponsors include founder Polkadot Wood Gavin, who deposited $5.8 million; anonymous sender of a donation of $1.86 million, “apparently coming from the sale of NFTs created by Julian Assange and digital artist Pak”; and Chain.com CEO, Deepak Thapliyal, who donated approximately $290,000. However, the majority of donations come from ordinary individuals and are under $100.
A separate initiative called UkraineDAO was launched at the beginning of the war by Nadezhda Tolokonnikova, a member of the Russian activist group Pussy Riot, along with Trippy from Trippy Labs and members of PleasrDAO. Raising ETH through PartyBid, UkraineDAO has collected donations from prominent tech individuals and organizations such as online subscription platform OnlyFans and Reddit co-founder Alexis Ohanian. By March 3, UkraineDAO has raised more than 6 million dollars in Ether.
Although these numbers do not equal the amount of financial aid USA and European Union expected to send to Ukraine, which could reach around $16 billion, they set a unique precedent for immediate, direct and horizontal assistance to a humanitarian cause – certainly a tour of the global crypto community.
In addition to widespread enthusiasm for immediate assistance to those in need, the conflict has rekindled debate around the central issue of international regulation: Cryptocurrency’s Potential Ability to Subvert Financial Sanctions such as what the global community imposes on Russia. On March 2, at a hearing of the House Financial Services Committee of the United States Congress, California Representative Juan Vargas asked Acting Federal Reserve Chairman Jerome Powell whether cryptocurrencies could be “… exit” for financial transactions as Russia faces the possibility of a global SWIFT network shutdown. Powell wasn’t too specific in his answer but used standard crypto-suspicious language:
“There wasn’t the kind of regulatory framework that needed to be there. […] What is needed is a framework – specifically ways to prevent these unsupported cryptocurrencies from acting as a vehicle for financing terrorism, just criminal behavior in general, tax avoidance. and the like. ”
At the same time, a group of senators including some of the most consistent critics of the digital finance industry, such as Elizabeth Warren and Sherrod Brown, sent a letter to Treasury Secretary Janet Yellen expressing concern. their. Pointing to the examples of North Korea and Iran, the authors shared their fear that cryptocurrencies could be used to facilitate cross-border transactions in order to circumvent new sanctions.
Curiously, among the various tools for circumvention – such as the dark web and crypto wallets – the text emphasizes the possibility of “deploying a digital ruble”, which has nothing to do with the financial system. global decentralized government.
Evoking U.S. Regulatory Worries, France’s Finance Minister, Bruno Le Maire, Mentioned Cryptocurrencies in a speech on the enforcement of sanctions same day. He reassured the audience that the EU is “taking measures” against potential Russian moves in the use of cryptocurrencies, which “should not be used to circumvent financial sanctions.” Le Maire’s views were largely reaffirmed by his German counterpart, Christian Lindner.
Earlier, on February 25, European Central Bank President Christine Lagarde tied up succeeded in preventing Russia from using cryptocurrencies to evade sanctions by applying the law regulating the Market in Crypto Assets “as quickly as possible”.
The regulatory framework was scheduled for a vote in the European Parliament on February 28, but it was postponed due to concerns that it would misinterpreted as a proof-of-work ban cryptocurrency mining.
The industry was quick to respond to the widespread allegations, both verbally and in action. Both Cryptocurrency Publications and mainstream media published nuanced analyzes of why Russia’s elites cannot effectively replace access to SWIFT with cryptocurrency, citing several key reasons.
The first is the traceability of public ledger transactions, especially when it comes to large amounts of digital currency. Second, it’s a matter of volatility and transaction fees, which are unlikely to please those looking to turn around tens of millions or hundreds of millions of dollars.
Then there’s the cash bottleneck: There are still very few places in the world where huge sums of money can be withdrawn unnoticed, and global law enforcement knows about it, too. And, as experts say, an operation on the scale of a national economy would require the accumulation of large amounts of cryptocurrency, which is no trivial task in a financial universe where money is mined. tap rather than print.
The current ability of cryptocurrencies to serve as a stealthy, fast, low-cost tool for transferring large sums of money from sanctioned jurisdictions elsewhere appears to be rather limited compared to the existing infrastructure. Existing offshore web floors have sheltered wealth from any source for the past 50 years.
The cryptocurrency industry as a whole has show a conspicuous readiness to support the global effort to prevent Russian actions in Ukraine and comply with existing Anti-Money Laundering and Know Your Customer standards. In a Twitter thread, Ripple CEO Brad Garlinghouse explains why it is almost impossible for established international crypto platforms to avoid sanctions: “To convert cryptocurrencies From crypto to fiat, exchanges/etc rely on banking partners, who can lose their license if someone on the OFAC list can get through. “
This argument is echoed by Brian Armstrong of Coinbase, who also made the suggestion on Twitter and suspects that Russian oligarchs are using crypto to avoid sanctions.
It’s not just buzz in Twitter threads – several major players are taking action first to facilitate sanctions enforcement. On March 7, Coinbase published a blog post by its chief legal officer, Paul Grewal, in which he called for use cryptocurrencies to help ensure compliance with economic sanctions.
The platform reports that it has blocked 25,000 wallets linked to Russian individuals or entities that it believes have been involved in illegal activity. Cryptocurrency exchanges Qmall, BTC-Alpha, CEX.IO and Bithumb have also frozen or terminated Russian accounts.
Discussing recent developments with Cointelegraph, Ross Buckley, KPMG-KWM professor of disruptive innovation at the University of New South Wales, Sydney, shared a rather bleak vision of a global regulatory shift. demand will be severely affected by the war in Ukraine. In his view, countries that impose financial sanctions see any potential for evading sanctions as undermining their sovereignty:
“In my view, the Ukraine crisis and related sanctions pose a major challenge to the crypto industry. If cryptocurrencies are used to evade sanctions, a strong regulatory crackdown is to be expected. It is very difficult for sovereign states to tolerate the loss of their ability to impose sanctions.”
Haohan Xu, CEO of global digital asset trading network Apifiny, does not rule out a scenario in which Russian elites actually try to use digital assets as a trading tool. globally along with more obvious options like China’s state-owned UnionPay network. Speaking to Cointelegraph, he explained:
“The method of excluding Russia from participation in the global financial systems controlled by the United States would force Russia to adopt other systems that would, naturally, promote the development of systems that are not controlled by the United States. this control. […] In this case, cryptocurrencies will be legalized in some parts of the world and fall victim to tough regulations from countries that are enemies of Russia.”
The final game of discussions between global regulators and the crypto industry will be determined by a willingness to give up more around anonymity and decentralization, which are important parts of the world. important in its DNA.
As Xu noted, “While most of the community is in favor of pro-Ukraine, people are divided on the topic of big industry players rushing to comply.” Contrary to Coinbase’s proactive approach and the reassurance of industry opinion leaders, several voices emphasized the need to follow crypto’s core principles.
While this stance may sound less convincing in the midst of a humanitarian crisis, the issue is certainly easier to understand in the long run. “The point is the broader argument between centralization and control than decentralization and freedom,” argues Xu.
Buckley believes this presents a unique challenge to the crypto industry as its decentralization makes avoiding the prospect of tough regulation “nearly impossible.” He is not convinced by the traceability arguments of decentralized assets, doubting that the new digital economy has many advantages over the established foreign system. about its transparency:
“In the absence of the industry’s centralized coordinator, I cannot see how cryptocurrencies in general would not be used to circumvent sanctions and thus trigger a regulatory backlash.” .
While Buckley believes that cryptocurrency can certainly be a good motivator, he thinks it is possible that Western powers won’t see it that way if Russia successfully uses it to mitigate the impact. of punitive pressure.
https://cointelegraph.com/news/ally-or-suspect-the-war-in-ukraine-as-a-stress-test-for-the-crypto-industry Allies or doubts? War in Ukraine as a stress test for the crypto industry