How digital assets are making a difference in the midst of war

The ongoing conflict in Ukraine has become a stress test for crypto in many ways. Digital assets have emerged as an effective means of directly supporting humanitarian efforts, and despite intense pressure, the crypto industry has largely shown itself to be a mature community – a community willing to comply with international guidelines without compromising the core principles of decentralization.

But there’s another important role crypto has taken on during these tragic events: it’s becoming increasingly familiar to those cut off from payment systems that once seemed infallible.

Traditional financial infrastructures typically don’t work well during military conflicts and humanitarian crises. From hyperinflation and cash shortages to the destruction of ATMs, crises can disrupt the functioning of the banking system and threaten the money supply of millions of ordinary people.

Cointelegraph spoke to some of the people who experienced these disruptions first-hand in the early days and weeks of the war. Some of them didn’t know much about crypto and had to learn quickly, while others were lucky enough to have some digital asset experience to draw on.

Some of these people are from Ukraine and witnessed the struggles of the war first-hand, while others are from Russia and had to leave the country when their ordinary lives collapsed overnight. Their stories show that when the world collapses, it is ordinary people for whom crypto provides the last line of support, not the corrupt elites.

“Crypto was originally created so that no single government or individual could control it”

Viktoria Fox is a Ukrainian-American entrepreneur and the founder and CEO of Polaris Capital, a cryptocurrency mining company. Her parents moved to the United States from Ukraine during the turmoil of the post-Soviet 1990s. When war broke out on February 24, her family in the US received unpleasant phone calls from their relatives in Ukraine. When Russian troops invaded the country, the National Bank of Ukraine immediately halted all securities circulation and limited cash withdrawals, sparking a nationwide frenzy.

Although the central bank claimed that the banking and financial systems remained “resilient” after the Russian invasion, Fox’s relatives told a fundamentally different story:

“I was told the banks are closed and all ATMs are out of cash. After two weeks of war, like most families, my relatives ran out of money.”

Since then, Fox has been sending them Bitcoin (BTC), which acts as a cash substitute for sellers and fellow citizens — a means to pay for almost anything from groceries to taxis. Viktoria’s uncle used bitcoin to compensate a driver who drove six hours to get him from Kharkiv to the western part of the country.

In Fox’s experience, most Ukrainians prefer to conduct transactions through well-established global exchanges such as Coinbase and Binance, although some also rely on Ukrainian exchanges.

“I think it’s important to remember that crypto, especially bitcoin, was originally created so that no single government or individual could control it,” Fox noted. “While it would be tempting to punish the ‘bad’ Russians and reward innocent Ukrainian civilians, it defeats the whole purpose of a decentralized currency or fortune.” would help this or a future war.

“For me as an anarchist, it was a matter of ideological choice, not comfort”

Until a few weeks ago, “Andrey” lived in the Russian city of Saint Petersburg, where he was born. Andrey is a frontend developer and has some professional experience with blockchain platforms. “I probably couldn’t write a smart contract, but I sure know how to use crypto in day-to-day financial operations,” he said. “I’ve had experience withdrawing USDT here and there, and I’ve never done it with bank cards. For me, as an anarchist, it was a matter of ideological choice, not comfort.”

When Andrey left for Berlin on the fourth day of the war, all his belongings consisted of a laptop, a pair of t-shirts and a hardware wallet with some hard-earned stablecoins:

“I had to use them to buy plane tickets to travel within Europe. The last thing I did with my Visa card was rent an apartment on Airbnb for two weeks. I was lucky to have some friends in Europe and now they help me to pay with cards when needed. I just send them the coins.”

In the long run, Andrey admitted that he still needs Fiat to buy groceries and other necessities. He has yet to learn the peer-to-peer withdrawal tools available in Europe. Still, he considers the decision to get a hardware crypto wallet one of the wisest moves of his life. “It’s not like I prepared for anything like this, but you know, if you’re living under authoritarianism, you’d better be independent of the local banks.”

Andrey admitted that crypto’s withdrawal in a new jurisdiction could also pose a big problem. He said:

“Despite my extensive knowledge of the industry, I am currently in a difficult position. Germany has very strict requirements for cash withdrawals and I am still researching ways to do this.”

It’s not just about personal needs. Andrey is a Russian citizen whose father was born and raised in southern Ukraine. He has no legal way of donating money to support the efforts to help Ukraine’s civilian population – such an act could be considered a criminal offense or even high treason by the government. Andrey remarked:

“Like many others in Russia, I have friends in Ukraine. Some of them are now in Kyiv, sleeping in bomb shelters under artillery fire. My problems are nothing compared to theirs. To help them, I had to find someone local willing to exchange my USDT for hryvnia [Ukraine’s currency]. After making sure my friends’ bank cards worked, I jumped at this opportunity. The sum wasn’t huge, but I hope it was at least a help.”

“We could not receive international transfers to Ukrainian accounts”

Anna Shakola, a native of Kiev, started working as NFT project manager at Cointelegraph in November 2021, a few months before the outbreak of war. Until the beginning of the crisis, she had not used crypto as a payment method: “To be honest, I had never paid with crypto except for transactions in NFTs. I have only used these assets as an investment vehicle.”

Shakola had to learn quickly as the fiat financial system was partially frozen during the first three weeks of the war: “We couldn’t receive international transfers to Ukrainian accounts and we also had some problems with domestic fiat transfers.” After she got used to it, everyday transactions with digital currencies, she learned about Unchain, a non-profit project founded by Ukrainian blockchain activists.

Related: How crypto became a major source of relief for embattled Ukraine

Unchain began channeling donations to Ukrainian civilians on February 27 after a network of local crypto-fiat exchanges supported the initiative. The next step was the issuance of virtual debit gift cards known as “Help Cards” in partnership with Kyiv-based Unex Bank and Weld Money. The cards are designed to help families — mothers and children — who may not have the time to learn how to use crypto in the midst of war. Unchain accepts donations in crypto and converts them to hryvnia on the receiving end. It is planned to finance up to 10,000 Help Cards.

The war has undoubtedly shaken the global economic order and has also become a profound stress test for the crypto industry. Despite suspicions that digital assets could undermine the international sanctions regime, they have emerged as a resilient, flexible payment system with the potential to help millions of people through their toughest day.

It is no coincidence that the Ukrainian government lobbied for measures that would develop its post-war digital economy. On March 16, Ukrainian President Volodymyr Zelenskyy signed a law creating a legal framework for the country to establish a regulated crypto market. Given the need to rebuild the country after hostilities end, the nation’s hard-earned experience with crypto will likely help develop a thriving digital economy.