War is expensive. The United States spent about US$1.1 trillion (£830 billion) on the 2003 Iraq war in today’s money, while the Falklands war cost the UK the equivalent of about £2.6 billion.
Funding is therefore an important resource in any conflict, similar to that of artillery, fuel and boots on the ground. The burden of finance traditionally falls to governments, often in the form of issuing war bonds. Ukraine is currently issuing US$270 million in war bonds for that very purpose.
Interestingly, however, Ukraine is also drawing on options that were not available until very recently. Several days after the Russian invasion, Mykhailo Fedorov, vice prime minister of Ukraine and minister of digital transformation, called on people around the world to show solidarity with Ukraine by making crypto donations.
At the time of writing, donations have exceeded US$50 million. This may not be in the same league as the value of the war bonds or the financial aid and military assistance being offered by governments around the world, but it’s not insignificant. It shows individuals collectively having a state-like impact on the global stage.
This new way of accessing global private capital is a refreshingly welcome facet of cryptocurrencies. By going straight to the people of the world, Ukraine’s government has been able to raise finance quickly without the need for financial intermediaries.
Yet as ever with cryptocurrencies, they bring benefits and risks in equal measures. They also have the potential to help Russians to evade the crashing rouble – contrary to demands by Ukraine. Mykhailo Fedorov, for example, pleaded on Twitter for, “all major crypto exchanges to block addresses of Russian users … It’s crucial to freeze not only the addresses linked to Russian and Belarusian politicians, but also to sabotage ordinary users”.
The crypto community has not wholeheartedly agreed. One leading Twitter user, David Gokhshtein, replied that he is, “definitely with Ukraine and for peace but we don’t do that in crypto”.
Changpeng Zhao, founder of leading exchange Binance, has said that it’s not the place of crypto exchanges to restrict Russian activities in general, though he emphasised that his exchange was not permitting any of the hundreds of wealthy Russian individuals on western sanctions lists to use its services. Even then, he said, it was impossible to stop them because there were so many other exchanges that they could use instead.
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