Ukraine showed the good side of crypto's role in 'illicit' finance, outraising Russia 44-to-one in 2022, but its funding stream has been slowing while Russia's has not.
Researchers have found that Ukraine's war-effort crypto fundraising outdid Russia's by 44 to one in 2022.
But the advantage is slipping, blockchain intelligence firm Elliptic told the Financial Times.
While Ukraine's early embrace of crypto brought in $200 million at the start of the war, including $80 million sent directly to the government, Elliptic said that the donation rate has dwindled while Russia's small-but-steady $5 million raise has kept pace.
Which is not to diminish the impact that crypto had, an Elliptic analyst said, noting that it amounted to one fifth of all private funds raised by Ukraine since the Russian invasion.
"Ukraine bet big on crypto by offering donation addresses literally hours after the invasion, and it did pay off," the analyst said. "Twenty percent of grassroots funds coming from crypto is no small feat."
Beyond the direct impact of those funds — body armor, helmets and communications gear as well as humanitarian efforts — the coverage gave the crypto industry a PR boost, while also showing just how fast crypto finance can move.
Illicit to Who?
At a March 17, 2022, hearing of the Senate Banking Committee on the role of crypto in supporting illicit activities, Michael Chobanian, founder of the KUNA crypto exchange and president of Blockchain Association of Ukraine, said the speed of crypto was a vital component.
"For my country, which is fighting right now with bare hands, time is vital," Chobanian said, pointing to the then $50 million raised by the official Ukrainian crypto fund, as well as another $50 million raised through private channels. "Crypto, which works 24/7, we receive the money instantly and we can spend the money instantly," he said.
During that hearing, witness Michael Mosier, a former acting director of the Treasury Department's Financial Crimes Enforcement Unit (FinCEN) pointed out that when speaking about crypto's use in illicit finance — including evading U.S. sanctions on Russia — "we must not forget defenders of democracy whose financing might be considered 'illicit' to the autocrats and invading armies they resist."
Beyond Ukraine, he pointed to a U.S. program that used cryptocurrency to make direct aid stablecoin payments to 60,000 Venezuelan healthcare workers using previously frozen Venezuelan funds. Mosier added:
"No doubt the Venezuelan regime considered the use of those previously frozen assets 'illicit finance,' but to us, they were cryptographically-secure humanitarian aid."
Crypto is Neutral
The flipside of that is it works just as well for the bad guys, Elliptic told the FT.
It estimated that a Russian military fundraising group active in the Russian-controlled Donbas region of Ukraine has raised about $1.8 million in bitcoin.
Beyond that, the Elliptic analyst pointed to a particularly nasty, ransomware-style use of crypto by Rusich, a paramilitary group fond of neo-Nazi symbolism. It has been offering the relatives of fighters killed in the war the coordinates of their loved one's bodies in exchange for $2,000 to $5,000 in crypto.
