Crypto as a Lifeline: How Digital Assets Help Ukrainians Navigate Financial Chaos Amid War

Cryptocurrencies have offered a safety net to people living in contexts of war, displacement, and economic duress. In countries like Ukraine, the accessibility, low transaction costs, and lack of intermediaries associated with digital assets have given citizens a measure of control over their finances since the start of the Russian invasion.

BeInCrypto spoke with representatives from Hacken, Rewump, Grassroots Economics, and Namada & Anoma on the challenges displaced populations face‬‭ in‬‭ accessing‬‭ traditional‬‭ financial‬‭ services and how digital assets can act as a lifeline.

How Did War Cripple Access to Traditional Finance for Ukrainians?

Since Russia invaded Ukraine in February 2022, Ukrainians’ access to financial services has been extremely limited. Many bank branches were forced to close due to security concerns, damage, or the inability of staff to reach work. Ukraine’s national bank imposed limits on cash withdrawals at ATMs.

Russian strikes have purposefully targeted the country’s electricity grid, leaving Ukrainians in the dark and without access to a stable internet connection. The nation has grown accustomed to regular outages, which limit access to mobile banking and heighten reliance on cash.

“‬When‬‭ war‬‭ erupts,‬‭ it’s‬‭ not‬‭ just‬‭ physical‬‭ infrastructure‬‭ that‬‭ collapses—electricity‬‭ goes‬‭ out,‬‭ cities‬‭ are‬‭ occupied,‬‭ and‬‭ daily‬‭ life‬‭ grinds‬‭ to‬‭ a‬‭ halt.‬‭ In‬‭ times‬‭ of‬‭ extreme‬‭ uncertainty,‬‭ panic‬‭ sets‬‭ in.‬‭ People‬‭ rush‬‭ to‬‭ ATMs,‬‭ desperate‬‭ to‬‭ withdraw‬‭ cash,” Dyma‬‭ Budorin,‬‭ CEO‬‭ &‬‭ co-founder‬‭ at‬‭ Hacken‬, a cybersecurity company with Ukrainian roots, told BeInCrypto.

Obligated by dire circumstances and the need to adapt, Ukrainians sought other alternatives to maintain some degree of financial autonomy. Many of them found the answer in cryptocurrency.

“Digital‬‭ assets‬‭ like‬‭ liquidity‬‭ pools‬‭ for‬‭ communities‬‭ and‬‭ on-chain‬‭ mutual‬‭ aid‬‭ networks‬‭ allow‬‭ for‬‭ trustless‬‭ peer-to-peer‬‭ transactions‬‭ in‬‭ war-torn‬‭ countries‬‭ where‬‭ traditional‬‭ institutions‬‭ might‬‭ no‬‭ longer‬‭ be‬‭ accessible‬‭ or‬‭ even‬‭ operating.‬‭ They’re‬‭ also‬‭ a‬‭ great‬‭ alternative‬‭ to‬‭ fiat‬‭ since‬‭ the‬‭ local‬‭ currency‬‭ of‬‭ countries‬‭ in‬‭ conflict‬‭ often‬‭ experience‬‭ hyperinflation,‬‭ and‬‭ aid‬‭ or‬‭ remittance‬‭ payments‬‭ rely‬‭ on‬‭ centralized‬‭ institutions‬‭ which‬‭ may‬‭ be‬‭ unstable‬‭ or‬‭ politically‬‭ controlled,” said Will‬‭ Ruddick‬‭, founder of Grassroots Economics Foundation.

Although Ukraine was a leader in digital asset adoption before the war, its usage has proliferated since 2022.

Crypto’s Role in Funding Ukrainian Aid Efforts

Since the start of the war, pro-Ukrainian causes have leveraged blockchain technology as a fundraising method for donations. According to an Elliptic report, they have since raised over $212.1 million in cryptoassets, predominantly donations to official Ukrainian government wallets. By the fourth day of the war, around $30 million was already raised.

“The‬‭ crypto‬‭ industry‬‭ rallied‬‭ around‬‭ Ukraine,‬‭ offering‬‭ new‬‭ ways‬‭ to‬‭ directly‬‭ contribute‬‭ to‬‭ relief‬‭ efforts‬‭ and‬‭ support‬‭ the‬‭ government.‬‭ From‬‭ medical‬‭ aid‬‭ and‬‭ civilian‬‭ relief‬‭ to‬‭ defense‬‭ equipment,‬‭ these‬‭ funds‬‭ have‬‭ been‬‭ hugely‬‭ supportive‬‭ in‬‭ Ukraine’s‬‭ time‬‭ of‬‭ crisis,”‭ Ruddick said.

Decentralized Finance (DeFi), Non-Fungible Tokens (NFTs), and Decentralized Autonomous Organizations (DAOs) have emerged as significant tools in facilitating cryptocurrency fundraising efforts for Ukraine.

According to Elliptic, these novel technologies have collectively raised over $78 million in donations to support the country. NFT campaigns have played a substantial role in this broader effort, accounting for approximately 10% of the funds raised.

“‭Blockchain‬‭ infrastructure‬‭ provides‬‭ the‬‭ most‬‭ powerful‬‭ channel‬‭ for‬‭ high-value‬‭ single‬‭ donations.‬‭ Vitalik‬‭ Buterin‬‭ contributed‬‭ at‬‭ least‬‭ $5‬‭ million,‬‭ Gavin‬‭ Wood‬‭ donated‬‭ $5.8‬‭ million.‬‭ Moreover, UkraineDAO’s NFT sale of the national flag raised $6.75 million,” Budorin added.

Meanwhile, cryptoassets have also provided displaced Ukrainians with significant financial flexibility.

What Financial Hurdles Do Displaced Ukrainians Face?

According to data from the UN Refugee Agency (UNHCR), nearly 7 million refugees have fled Ukraine since the start of the war. Meanwhile, around 3.7 million Ukrainians have been internally displaced.

Sergii Malomuzh, founder of Rewump, explained that displaced individuals face multiple obstacles in accessing traditional financial services. These include the loss of crucial identification, the inability to conduct transactions abroad due to a lack of local banking, high international transfer fees, and the instability of their national currencies.

“Digital‬‭ assets‬‭ can‬‭ help‬‭ address‬‭ these‬‭ challenges‬‭ by‬‭ providing‬‭ access‬‭ to‬‭ financial‬‭ services‬‭ without‬‭ needing‬‭ physical‬‭ documents,‬‭ being‬‭ unaffected‬‭ by‬‭ geographical‬‭ restrictions,‬‭ offering‬‭ lower‬‭ costs‬‭ for‬‭ international‬‭ transfers,‬‭ and‬‭ enabling‬‭ operations‬‭ without‬‭ depending‬‭ on‬‭ banks.‬‭ They‬‭ also‬‭ act‬‭ as‬‭ a‬‭ way‬‭ to‬‭ preserve‬‭ value‬‭ through‬‭ stablecoins,” Malomuzh told BeInCrypto.

While cash is another option, carrying one’s life savings in physical form makes refugees vulnerable targets.

Digital vs. Physical Cash

Beyond the impracticality of refugees carrying large sums of cash, the security offered by digital assets has quickly become a vital advantage for those forced to flee their homes.

“‬‭For‬‭ refugees,‬‭ carrying‬‭ cash‬‭ across‬‭ borders‬‭ was‬‭ not‬‭ only‬‭ impractical‬‭ but‬‭ also‬‭ dangerous,‬‭ as‬‭ they‬‭ were‬‭ already‬‭ a‬‭ vulnerable‬‭ population‬‭ at‬‭ risk‬‭ of‬‭ theft,‬‭ loss,‬‭ or‬‭ exploitation.‬‭ Having‬‭ their‬‭ savings‬‭ in‬‭ digital‬‭ form‬‭ provided‬‭ a‬‭ safer‬‭ alternative,‬‭ allowing‬‭ them‬‭ to‬‭ securely‬‭ access‬‭ and‬‭ transport‬‭ funds‬‭ without‬‭ the‬‭ risks‬‭ associated‬‭ with‬‭ physical‬‭ cash,” Budorin said.

The ability of digital assets to bypass traditional banking hurdles directly translates into the speed and efficiency required in the often fast-moving circumstances of displacement.

“Additionally,‬‭ digital‬‭ assets‬‭ allow‬‭ financial‬‭ transactions‬‭ to‬‭ happen‬‭ without‬‭ relying‬‭ on‬‭ banks,‬‭ which‬‭ is‬‭ crucial‬‭ in‬‭ these‬‭ situations.‬‭ Their‬‭ low‬‭ transaction‬‭ fees‬‭ and‬‭ high‬‭ liquidity‬‭ also‬‭ make‬‭ them‬‭ user-friendly.‬‭ The‬‭ decentralized‬‭ nature‬‭ of‬‭ cryptocurrencies‬‭ means‬‭ that‬‭ funds‬‭ can‬‭ be‬‭ sent‬‭ rapidly‬‭ to‬‭ areas‬‭ affected‬‭ by‬‭ conflict‬‭ or‬‭ disaster,‬‭ bypassing‬‭ the‬‭ slowdowns‬‭ common‬‭ in‬‭ traditional‬‭ financial‬‭ systems.‬‭ This‬‭ empowers‬‭ people‬‭ to‬‭ maintain‬‭ control‬‭ over‬‭ their‬‭ finances,‬‭ even‬‭ in‬‭ situations where banks may fail,” ‭Malomuzh added.

However, even with the numerous advantages of crypto in war-torn conditions, significant risks and challenges warrant consideration.

What Are the Privacy Risks?

Adrian‬‭ Brink‬‭,‬‭ co-founder‬‭ of‬‭ Namada & Anoma‬, highlighted the distinct difference between anonymous and pseudonymous privacy features. While the former refers to a real-world identity that is completely unknown, the latter alludes to an identity that is not directly revealed.

“A‬‭ big‬‭ risk‬‭ is‬‭ that‬‭ people‬‭ adopt‬‭ cryptocurrencies‬‭ without‬‭ understanding‬‭ the‬‭ tradeoffs,‬‭ privacy‬‭ being‬‭ a‬‭ huge‬‭ one,‬‭ where‬‭ people‬‭ think‬‭ that‬‭ these‬‭ systems‬‭ are‬‭ anonymous‬‭ when‬‭ they’re‬‭ really‬‭ not.‬‭ Especially‬‭ in‬‭ places‬‭ where‬‭ you‬‭ can’t‬‭ trust‬‭ the‬‭ ruling‬‭ state‬‭ or‬‭ when‬‭ adversaries‬‭ are‬‭ monitoring‬‭ networks‬‭ to‬‭ target‬‭ the‬‭ opposition,” Brink‬‭ told BeInCrypto.

Most popular cryptocurrencies, like Bitcoin and Ethereum, are pseudonymous. All transactions associated with a user’s wallet address are permanently recorded on the blockchain. While the user’s name isn’t directly apparent, various methods can eventually link activity back to their real identity.

“The‬‭ lack‬‭ of‬‭ privacy‬‭ with‬‭ public‬‭ blockchains‬‭ is‬‭ a‬‭ significant‬‭ issue.‬‭ The‬‭ ability‬‭ to‬‭ connect‬‭ people’s‬‭ identity‬‭ to‬‭ crypto‬‭ donations‬‭ opens‬‭ them‬‭ up‬‭ to‬‭ surveillance‬‭ and‬‭ can‬‭ actually‬‭ put‬‭ people’s‬‭ lives‬‭ in‬‭ danger.‬‭ We‬‭ urgently‬‭ need‬‭ the‬‭ ability‬‭ to protect people’s sensitive data when using blockchains,” Brink‬‭ added.

These risks are amplified when entire populations are under siege, potentially leading to repercussions against political opponents or specific targets.

“People’s‬‭ lives‬‭ can‬‭ be‬‭ at‬‭ risk‬‭ when‬‭ their‬‭ identities‬‭ can‬‭ be‬‭ linked‬‭ with‬‭ their‬‭ on-chain‬‭ activity,‬‭ so‬‭ we‬‭ really‬‭ need‬‭ to‬‭ see adoption and awareness of privacy-preserving systems. Education will be key here,” Brink concluded.

Ultimately, a focused global effort to understand, address, and effectively mitigate the inherent privacy risks within blockchain networks will unlock the future potential of digital assets to deliver even greater financial resilience for conflict-affected populations.

Overcoming these privacy concerns will make digital assets an even more powerful tool in contexts of war and human displacement.

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