War is a tragic and Sad use case for Cryptocurrency; In the end there will be more adopters.
War or Armed conflict is always tragic for all parties(people will die) and those involve often go through a horrible reality that others who are not witness can seat on an arm-chair and write or opinionated about without the horrid experience of living through it, and this can often come off as insensitive to the plight of the parties involved. I personally do not support any form of armed conflict as a means of resolution, and this article should not be misconstrued to supporting armed conflict as an acceptable means of resolution. It is important to state this at the beginning.
Supporters of crypto currencies always argue in favour of escaping government control and the independence of cryptocurrency, and although there are many use cases for their argument, they are certainly getting some unwelcomed and unexpected support from the conflict in Ukraine to add to their bouquet of arguments namely
1. As government implements policies to try to control the fall of the fiat currencies, such as limiting users withdrawals and money usage, they invariably support the arguments of crypto enthusiast that government control may not align with your money use and since its your money you should ultimately decide what you want to do with it; crypto currencies allow you to do this; sounds very selfish-right? Well that is capitalism.
2. The decentralization of crypto currencies and its global nature argument is being supported also, as more people seek to escape the conflict axis with their wealth intact, they adopt a currency that can be accessed anywhere in the world as long as you have internet and crypto currencies can do this better than fiat currencies.
3. Although crypto currencies also tanked, they seem to be doing better in holding values than fiat currencies of the affected countries, their volatility being an advantage here, easily devalue and easily regain value, fait currencies cannot react that fast.
This conclusion are being supported by available information from Ukraine and to a lesser extent Russia, indeed another argument has been that cryto currencies availability can effectively counter the impact of economic sanctions although we are a big big step away from there.
Increasing Crypto currency activities in Ukraine
According to Bitcoin Magazine(Feb,2020) about 5.5 million Ukrainians, or about every eighth Ukrainian own cryptocurrency. The country was determined to be a top nation for cryptocurrency adoption according to a Chainalysis report in 2020. So it comes as no surprise that usage on the Kuna has jumped in recent days.
Kuna -Kuna is the most popular cryptocurrency exchange based in Ukraine– https://www.bitrawr.com/ukraine
An article in the News Press further captures the argument, see here
Bitcoin (BTC) and altcoin trading volumes have surged at a major Ukraine cryptocurrency exchange in the aftermath of Russia’s invasion, data shows. According to monitoring resource CoinGecko, on Feb. 24, volume at Kuna almost trippled to over $4 million.
Crypto on the radar of Ukrainians
As the armed conflict with Russia began, the impact on the fiat currencies of both countries was immediately apparent.
While the Russian Ruble suffered noticeably more, the Ukrainian Hryvnia also fell, targeting 30 per dollar in what would be a new all-time low.
-The effect was obvious at seven-year-old Kuna, volumes at which were under $1 million on Feb. 21 but almost $4.1 million three days later.
As per the CoinGecko data, the fervor has already begun to subside after the initial rush, this coinciding with stabilizing fiat rates versus the U.S. dollar and other major currencies.
Central bank tightens currency freedoms
A separate argument for entry into Bitcoin meanwhile came from government currency controls this week.
On Wednesday, the National Bank of Ukraine began restricting cash, limiting hryvnia withdrawals to 100,000 UAH ($3,353) per day, and banning cross-border foreign currency purchases and withdrawals outright.
A Facebook post confirmed that the Bank also sought to establish a stable hryvnia exchange rate.
Russia’s central bank meanwhile began intervening in forex markets to prop up its nosediving ruble Thursday, with several moves seemingly occuring over the past 24 hours.
Futures: Crypto Currencies an alternative to SWIFT
Whilst the amount of transactions conducted via cryptocurrencies are a miniscule of what is conducted via the traditional monetary system the fact remains that the decentralized nature of digital currencies like bitcoin and ethereum allows governments and non-governmental entities alike the benefit of peer-to-peer transactions — as long as both parties agree a cryptocurrency as a means of payment they could ultimately do business directly without the use of SWIFT payment system.
This could also drive an unexpected increase in adoption for cryptocurrencies, thus strengthening them against Fait currencies something most government are fighting hard against.
Russia lukewarm to Crypto currency
The New york post report identified that Russian authorities view crypto currencies as a pyramid scheme and have a lukewarm attitude to it, but still proposed the creation of a Digital Ruble, which you could argue is closer to crypto currencies than Fiat currency the one major difference being government backed and the other decentralized.
The report also mentioned that 17 million digital-savvy Russians who are connected to the internet own some $23 billion worth of cryptocurrency.
Other arguments also show how Russia itself could undermine the effect of any sanctions with the use of cryptocurrency
Support for Alternative Currency — CryptoCurrency
The facts are
1. More activities were recorded on the Bitcoin exchange Kuna, from fait currencies, suggesting that more people wanted to move their money to cryptocurrency than hold them in fiat.
2. That as government act to stabilize their currency and as a result control withdrawals etc, these actions played directly in favour of crypto currencies who have always argued against governments control and determination of what you could do with your money when and how.
More Cryptocurrency Adopters despite its shortcoming
Yes the development in Ukraine is providing cryptocurrency use case justifications, and all the Decentralized Exchanges (DEX), Oracles, Lenders, ETFs etc will use this, and although the events leading to this justification remains tragic and sad. It is true that cryptocurrency is a miniscule alternative and many more people will look and consider spreading their portfolios to include cryptocurrency and blockchain technology investments;
As they do they will discover the complex nature of cryptocurrency, its volatility and its crime affinity, still in the face of the uncertainty in the world — the risk of investing in cryptocurrency for a chance to have money anywhere in the world diminishes and there will be more adopters.
Many will seek to find a safer-risk managed entrance, many will find cryptocurrency ETFs or crypto based Bank Alternatives to be a safer option to entrance, many will invest in Bitcoin being by far the largest cryptocurrency, others will look at less costly entrance, whatever they do, many more will come into the cryptocurrency space from the tragic events of the Ukraine-Russia conflict.
Once again death is always tragic, it knows no side, it is never the best way for conflict resolution.
(originally published on medium here)
References
2. https://nypost.com/2022/02/24/how-russia-can-use-crypto-to-avoid-us-sanctions-over-ukraine/
3. https://bitcoinmagazine.com/markets/new-law-makes-ukraine-the-future-of-bitcoin
The war in Ukraine will definitely lead to more adoption in that part of the world. But I also fear for the,future of cryptos as government looks to control it to prevent Russia evading sanctions