Opinion: Russia-Ukraine War Shows Why Crypto Regulation Is Needed

Does the war in Ukraine show that cryptocurrencies have an unprecedented critical role in humanitarian crises, or does it show that they are completely untamable?

Shortly after Russia began its invasion of Ukraine, the Ukrainian government took to Twitter to request funding in the form of BTC , ETH and USDT. According to Michael Chobanian, founder of Kiev-based Kuna exchange and chairman of the Ukrainian Blockchain Association, the total amount received so far has exceeded $60 million. Chobanian regularly updates the data via his Twitter account.

Unlike aid promised by governments around the world, the Ukrainian military was able to access the funds in minutes, not weeks.

For individuals, cryptocurrencies could offer a potentially life-saving means of fleeing a crisis. A computer programmer from Lviv says he escaped the war thanks to bitcoin . With cash machines severely restricted and queues forming at banks, he was able to move all his savings across the border to Poland. Now, he’s volunteering in Poland to help Ukraine win the digital war, combating online propaganda and galvanizing Russian voices.

However, Russians can also use the same method to quickly transfer large sums of money. As sanctions on the traditional economy tighten, oligarchs and ordinary citizens alike are finding new ways to move money and avoid mechanisms designed to cut Russia off from global money flows. Cryptocurrencies are part of it.

Is this the nature of the beast? Are cryptocurrencies intrinsically value neutral? Or, is there a way to combine the rapid digital liquidity of funds under extreme conditions that cryptocurrencies provide with the ability to impose limits?

a nasty question

Just asking this question offends a good portion of the crypto community. They will argue that the whole point of distributed ledger technology is that no central authority can exert and maintain control in a consistent and morally acceptable way for all. Morality - we live in a postmodern world - is relative. No one—including the world's greatest philosophers—has figured out a satisfactory way to reconcile this moral disconnect. So we have cryptocurrencies, which are as accessible to drug cartels, arms dealers, and gangsters as to charities trying to save lives in catastrophic situations.

One way to solve the problem of cryptocurrency value is to use a closed user base. We can create new cryptographic tokens and DAOs to operate them, embodying the values of the founders and participants. For example, the Klima token embodies the belief that continuous carbon emissions are catastrophic for society and the planet. Its starting point is to drive up the price of carbon offsets, which, once applied to a project, can no longer be sold.

There are plenty of other cryptocurrencies that take a completely neutral view on the Ukraine-Russia conflict. Nothing changes the principles on which these value-neutral tokens were created.

Crypto regulation is already having an impact

I believe there is more that can and should be done. As a European regulated financial institution, NexPay acts as a deposit gateway, enabling businesses to convert digital assets such as crypto tokens into fiat currency and send them to bank accounts. This is because, in the real world, the vast majority of transactions are still conducted with fiat currencies. Cryptocurrencies are maturing rapidly, but the total value of the global cryptocurrency market is about $2 trillion, compared to the value of the fiat currency economy is about $1300 trillion.

Although it’s been called the wild west of finance, we’ve seen just how well regulation is in place for cryptocurrencies. Anyone who has tried opening a crypto account knows that it is not an easy task and there are many regulatory hurdles to overcome.

Regulators have also been candid about the use of cryptocurrencies to circumvent sanctions amid the current conflict. In the United States, a group of Democrats on the influential Senate Banking Committee wrote to Treasury Secretary Janet Yellen expressing concerns that cryptocurrencies could be used to evade sanctions. The UK’s Financial Conduct Authority (FCA) has contacted every crypto firm registered with it to ensure they are aware of the sanctions and their responsibilities, and are monitoring the situation. ECB President Christine Lagarde has called on the European Union to move forward with its Market in Cryptoassets (MiCA) regulation as soon as possible following Russia’s invasion of Ukraine.

Regulators in some jurisdictions already have the power to place individuals, such as Russian oligarchs, on sanctions lists or lists of politically exposed persons, and companies that fail to comply face hefty fines, severe reputational damage, and possible suspension of their business licenses.

Whether due to these pressures, or their own moral stance, many large cryptocurrency exchanges are now enforcing sanctions. But they resisted calls for a blanket ban, arguing it would hurt ordinary Russians. There is also an argument that people will find other ways to break the sanctions. Binance CEO Changpeng Zhao said: "If people want to avoid sanctions, there are always multiple ways. You can use cash, use diamonds, use gold to avoid. I don't think there is anything special about cryptocurrencies." However, this This view ignores the digital nature of cryptocurrencies, which makes them easier and faster to move money than any traditional physical store of value.

Regulators are not winning the war, far from it. But they are stepping up efforts to find ways to circumvent cryptocurrency sanctions. Our own experience tells me that regulatory scrutiny of cryptoassets can only go in one direction.

A perfect system will never be created that allows funds to go where they are needed while preventing them from being exploited by bad actors. This is simply because the world will never agree on who the bad actors are — take the difficulty the UN has had in agreeing on this, for example. But in situations as clear as the illegal invasion of an independent country, we can and must continue to harness the power of cryptocurrencies coupled with proper regulation to help refugees rebuild their lives in new homes and stem the flow of funds to those that seem geopolitical. countries and peoples planning aggression.

TEXT: ULDIS TĒRAUD KALNS‍