Escalating War Fosters Crypto Activity in Russia and Ukraine
The
Russian aggression on Ukraine is unrelenting, and there seems little
possibility of the cessation of hostility. But the war has expanded the use of
crypto-related activity in both countries, according to Chainalysis. The fiat
inflation and sanctions pressure have contributed to the surge in transaction
volumes, according to the blockchain analytics firm, while Eastern Europe as a whole
sustained its role in the global crypto ecosystem.
Russians and Ukrainians Turn to Crypto as Military Conflict Deepens
The
Russian invasion of Ukraine and the ensuing military conflict have deeply
affected both nations, including cryptocurrency, Chainalysis explains in an
excerpt from its upcoming 2022 Geography of Cryptocurrency Report. Citizens of
both countries have experienced the economic impact of the war.
Russian
and Ukrainian cryptocurrency transfers increased shortly after the hostilities
began in late February. In the following weeks and months, trends began to
change, and while Russian transactions wavered in a relatively narrow range,
possibly impacted by restrictions on services, Ukrainian transactions
steadily rose through June.
The
Ukrainian hryvnia-denominated trade volume jumped 121% to USD 307 million,
while the Russian ruble-denominated trade volume rose 35% to USD 805 million in
March. "After that, we see volumes drop off for both countries, ebbing and
flowing through August, but never reaching their March highs," the authors
of the study have noted.
With
the currency controls introduced under the martial law imposed by Kyiv,
including restrictions on the cash purchases of U.S. dollars, euros, and
transfers abroad, some Ukrainians may have looked to exchange their hryvnia
holdings for cryptocurrency, according to Tatiana Dmytrenko, a high-ranking
adviser in the Ministry of Finance, Ukraine, and member of the World Economic
Forum’s Digital Assets Task Force. Crypto trading volumes declined after the
measures were relaxed in July.
Chainalysis
quotes a case study of a money laundering specialist on similar activity in
Russia, where currency restrictions were also applied. He commented, "The
major question was not just for oligarchs but also for ordinary Russians who
had to invent ways to remit money."Many began looking for new places where they could
cash out their crypto," he added, citing the UAE, Turkey, Kazakhstan, and
Georgia as jurisdictions where Russians could have found such services.
The
researchers maintain that crypto markets are hardly liquid enough to support
systematic sanctions evasion. So cryptocurrency could potentially play a role
in financing Russia’s foreign trade after its banks were cut off from the
global payment messaging network SWIFT. The expert pointed out that the Central
Bank of Russia recently agreed to legalize crypto payments for
cross-border settlements, and some companies may have already
started using digital assets for such transactions.
Eastern Europe Maintains 10% Share of Global Crypto Transactions
Eastern
Europe is the fifth-largest cryptocurrency market, with USD 630.9 billion in
value received on-chain between July 2021 and June 2022, which is a little over
10% of the total global transactions during that period, Chainalysis said. The
region’s "comparative role in the bigger, worldwide crypto ecosystem has
stayed surprisingly consistent over the last few years" while other
regions have seen more volatility, the blockchain analytics firm has
elaborated.
"Risky
and illicit activity is still prominent when we look at Eastern Europe’s
on-chain activity. High-risk exchanges—those with no or low KYC requirements—account
for 6.1% of transaction activity in the region," the report further notes.
Chainalysis data reveals that over 18% of all cryptocurrency received by
Eastern Europe is from addresses associated with risky or illicit activity,
which is higher than any other region.
0 Comments