In Eastern Europe, one of the world’s largest cryptoasset markets, the Russian-Ukrainian War has further increased cryptoasset adoption. Between July 2021 and June 2022, Eastern Europe is the fifth largest region in the cryptoasset industry, representing 10% of cryptoasset transactions globally.[1] With the Russian invasion of Ukraine, donations were made to many organizations in that country through distributed data retention networks. The presence of crypto asset exchanges based in Russia and operating in other Eastern European countries was almost completely restricted during the war. Again, during the war period, there was a significant increase in crypto asset transactions subject to illegal activities in Eastern Europe.[2]
Cryptoasset activity in Russia has remained stable as many global cryptoasset service providers have banned many activities with Russia to avoid being subject to sanctions, and many distributed data retention transaction validators and network miners have not validated transactions that require interaction with Moscow-linked cryptoasset digital wallets to avoid falling under money laundering bans. In Ukraine, there has been a steady increase in cryptoasset transactions since the beginning of the war. In March 2022, the trading volume of crypto assets in Ukrainian hryvnia pairs increased by 121% compared to the average for 2021.
It is estimated that around 15% of Ukrainian citizens have used a distributed data retention network or own crypto assets at least once.[3] The Kiev government launched the first “NFT” based “war bond” by creating and selling 54 “digital collectible” (non-fungible token) crypto assets.[4] Another indication of cryptoasset adoption in Ukraine is that many pharmacies in the country have agreed to accept payments in cryptoassets.[5]
Ukraine is regularly subjected to large-scale cyber-attacks originating from Russia. Therefore, cyber security and cyber warfare are a fact of existence for Ukraine. Especially since the Russian invasion of Ukraine, the country has been subjected to serious cyber-attacks in almost every field, from banking infrastructure to energy facilities. At this point, it is important for Ukraine to use and create databases that are close to impossible to manipulate with the current technology, cannot be retrieved, cannot be deleted, and can remain online continuously with a “trustless” communication method.[6] Distributed data retention technologies are important for Ukraine because they have these characteristics.
Throughout the Russian-Ukrainian War, Ukraine was funded through cryptoassets and distributed data retention networks. In March 2022, after government organizations raised approximately $55 million through cryptoassets, Ukraine’s Minister of Digital Transformation Mykhailo Fedorov and Alex Bornyakov, Deputy Head of the IT Development Department of the Ministry of Digital Transformation, announced that Ukraine will have a full legal framework for cryptoassets.[7] As a matter of fact, as of August 2022, the amount of donations made to Ukraine through cryptoassets exceeded $100 million. Binance, the world’s largest cryptoasset service provider, created the “Ukraine Emergency Relief Fund” and directly provided $10 million to the Kiev government.
In April 2021, projects were carried out on whether the idle energy left over from nuclear power plants in Ukraine could be used to mine cryptoassets. Ukraine’s land registry and cadastral transactions are also recorded on blockchain ledgers. On March 15, 2022, the Law on Digital Assets entered into force with the signature of President of Ukraine Vladimir Zelensky, and the use and activities of cryptoassets became fully legal in Ukraine. Since 2021, the National Bank of Ukraine has been using Stellar, a distributed data storage network and its own crypto asset, for the use of the digital hryvnia. In fact, this network was used to transfer humanitarian funds to Ukraine in December 2022 on the initiative of the United Nations.[8] In addition, in order to take advantage of decentralized and distributed data storage technologies, the Government of Ukraine has announced a training plan on “web 3.0” technologies.
As a result, Ukraine has taken steps towards decentralized data retention technologies and the cryptoasset industry by leveraging the security of “decentralized” and distributed data retention networks. As Ukraine is under cyber threat from Russia and the cyber war intensifies in 2022, it has taken initiatives related to crypto-assets and distributed data holding technologies. Ukraine has become one of the fastest adopters of “web 3.0” protocols and technologies, both as an alternative for the country’s technological infrastructure, as a convenient store of value for citizens, and to facilitate access to international aid. Beyond distributed data retention technologies, Ukraine has become a leading state among the world countries in teaching digital technologies and translating digital adaptation into public policy. In terms of 2022’s development of distributed data retention technologies, Ukraine’s activities with distributed data retention networks during the hot war are of great importance in terms of proving the relevant technologies.
[1] “Eastern Europe’s Crypto Market Active, with Spikes in Last Year Driven by Russia-Ukraine War”, Chainalysis, https://blog.chainalysis.com/reports/eastern-europe-cryptocurrency-geography-report-2022-preview/, (Date of Accession: 01.01.2023).
[2] Ibid.
[3] “Global Crypto Adoption”, Triple A, https://triple-a.io/crypto-ownership-data/, (Date of Accession: 01.01.2023).
[4] “Ukraine Launches an NFT ‘Museum of War’ to Help Fund the Fight Against Russia”, Fortune, https://fortune.com/2022/03/29/ukraine-selling-nfts-war-bonds-meta-history-museum/, (Date of Accession: 01.01.2023).
[5] Helen Partz, “Ukrainian pharmacies enable crypto payments via Binance Pay”, CoinTelegraph, https://cointelegraph.com/news/ukrainian-pharmacies-enable-crypto-payments-via-binance-pay, (Date of Accession: 04.01.2023).
[6] “How to Stop Global Cybersecurity Threats Emerging From the Ukraine-Russia Conflict”, DLT, https://www.dlt.com/blog/2022/04/22/how-stop-global-cybersecurity-threats-emerging-ukraine-russia-conflict, (Date of Accession: 01.01.2023).
[7] “How Ukraine Embraced Cryptocurrencies in Response to War”, Financial Times, https://www.ft.com/content/f3778d00-4c9b-40bb-b91c-84b60dd09698, (Date of Accession: 01.01.2023).
[8] Andrew Asmakov, “UN Taps Stellar Blockchain to Send War-Impacted Ukrainians USDC Stablecoins”, Decrypt, https://decrypt.co/117312/un-taps-stellar-blockchain-send-war-impacted-ukrainians-usdc-stablecoins, (Date of Accession: 01.01.2023).
