Ukraine

Stellar partners with UNHCR to give Ukrainian refugees cash via USDC

One new project attempts to help bankless Ukrainian refugees, while another hopes to streamline international Red Cross projects.

Humanitarian groups have increasingly used blockchain technology to solve problems with lack of banking or inadequate identity verification in developing or war-torn nations.

Two new projects have been announced in December, including one that provides cash aid to Ukrainian refugees through the Stellar network and another that plans to offer cash and vouchers through the Partisia network.

But past blockchain projects have had mixed results. Some projects have been effective at allowing recipients to bypass red tape and receive the aid they need, but for others theuse of blockchain has turned out to be superfluous.

On Dec. 15, Stellar Development Foundation announced that it has formed a partnership with the United Nations High Commissioner for Refugees (UNHCR) to offer USD Coin (USDC) on the Stellar network as a form of cash assistance to Ukrainian refugees.

The USDC tokens will be redeemable at any MoneyGram location. The creators of the program believe this will make it easier for refugees to receive aid even if they don’t have bank accounts or can’t access the ones that they do have.

Tori Samples, Stellar aid assistant product manager, told Cointelegraph that by partnering with Moneygram for cash-out and by using Circle’s USDC digital dollar, “the whole solution becomes meaningful and accessible for people living in crisis.”

“This product was specifically designed to meet the needs of aid organizations delivering assistance in difficult environments. It can’t be experimental or not hold up to real-world use. Donor dollars are some of the most scrutinized in the entire world. The fact that some of the largest aid organizations are using Stellar Aid Assist today in Ukraine shows that it has real-world value and the potential to scale.”

Earlier this month, on Dec. 2, Partisia Blockchain Foundation held a “hackathon” in collaboration with the International Committee of the Red Cross. The goal of the event was to find ways that the Partisia network could be used to make Red Cross humanitarian aid payments more efficient.

History of ‘humanitarian blockchain’

While these attempts to utilize blockchain are worthy, the sector has a checkered history.

In an August paper titled “Humanitarian Blockchain: Inventory and Recommendations,” researchers from the Digital Humanitarian Network examined past attempts to leverage blockchain for the benefit of aid recipients. They found that blockchain did help some organizations to be more efficient at delivering aid, but in other cases, the technology had to be discarded because it didn’t add value.

It cited Building Blocks, a blockchain initiative started by the World Food Programme as an example of a successful project. It aimed to solve the problem of duplicative aid, or multiple aid services providing the same aid to the same people.

Related: What the Russia-Ukraine war has revealed about crypto

The project involved a permissioned blockchain network that allowed different aid organizations to collaborate with each other and share data. This removed silos between humanitarian groups and helped them to effectively target their aid where it was most effective. Building Blocks is still in operation today.

On the other hand, Direct Cash Aid, a program created by a consortium of 121 different humanitarian groups, had to abandon blockchain after it was found that the tech didn’t help its goals. Direct Cash Aid intended to use a blockchain-based self-sovereign identity (SSI) to help recipients in Ethiopia, Malawi, Kenya and the Netherlands who couldn’t establish their own proof of identity.

After experimenting with SSI, the program administrators realized that most recipients didn’t have smartphones, nor could they get adequate internet access. In addition, many aid organizations didn’t want to collaborate or didn’t trust the identity verification performed by other organizations. As a result, the SSIs created by the program “proved to currently have no value.” The program ended up scrapping its blockchain aspects in favor of more centralized identity verification systems.

Ukraine collabs with international consultants to update crypto framework

The Advisory Council on the Regulation of Virtual Assets held its first meeting, dedicated to adjusting the National Tax Code to the crypto market.

Working on their national crypto framework, the amendments to the law “On virtual assets,” the Ukrainian regulatory community actively collaborates with international experts. The list includes the international consultancy firm Ernst&Young and the USAID Financial Sector Reform project. 

On Dec. 1, the Advisory Council on the Regulation of Virtual Assets, organized by the National Securities and Stock Market Commission, held its first meeting. The regulatory experts discussed the amendments to the law “On virtual assets,” which should adjust the National Tax Code to crypto regulation. The event was attended by representatives of the President’s Office, the National Bank of Ukraine, expert organizations and the market community.

Ruslan Magomedov, the National Tax Agency of Ukraine chair, revealed that the regulators are working closely with Ernst&Young and the USAID to implement the European Markets in Crypto-Assets (MiCA) regulation in the Ukrainian digital assets market.

Related: National Bank of Ukraine releases draft concept for digital hryvnia

As Yaroslav Zheleznyak, a member of the Ukrainian Parliament (Rada), noted, the national approach will rely on the “do no harm” principle:

“The goal is simple — to make crypto circulation in Ukraine legal and safe, but according to the principle of ‘do no harm,’ so that the market receives not regulation, but incentives for development and competitive advantages.”

Ukrainian President Volodymyr Zelensky signed the law “On Virtual Assets” in March 2022. The bill establishes the National Securities and Stock Market Commission of Ukraine and the National Bank of Ukraine as two major regulators of the crypto market.

In November, a group of pro-crypto Ukrainian lawmakers and the public union Virtual Assets of Ukraine (VAU) revealed a joint roadmap for promoting and developing Web3 in the country. The roadmap proposes the launch of a regulatory sandbox for blockchain and Web3 projects. It also implements the creation of a national blockchain-backed land and realty register and the integration of Ukraine into the European Blockchain Partnership.

Ukraine-based blockchain firm blasts ‘fake news’ for crypto donation rumors amid FTX collapse

Sergey Vasylchuk, the CEO of Everstake, said individuals behind Russian propaganda used the fall of FTX “to spin yet another tale about money laundering.”

A blockchain firm that partnered with the Ukrainian government to launch a donation website amid the country’s war with Russia has pushed back against online rumors and conspiracy theories that its platform was used for politically motivated money laundering.

Ukrainian government officials partnered with Everstake, Kuna and the now infamous crypto exchange FTX to launch Aid for Ukraine in March, following the Russian invasion. According to Everstake, crypto users and Ukraine supporters sent roughly $60 million in crypto and fiat aimed at supporting Ukraine’s armed forces and other humanitarian causes. However, with FTX’s liquidity issues and bankruptcy, Sam Bankman-Fried falling from grace, and legal action against the firm and its executives, social media users have taken many liberties with the truth over the final destination of the crypto donations.

The conspiracy theories promulgated online falsely claim that due to its association with FTX and Bankman-Fried’s previous political donations, Aid for Ukraine’s funds ended up being funneled to the United States Democratic Party. Among those spreading the rumors is U.S. Representative Madison Cawthorn of North Carolina. An Everstake spokesperson branded the claims “Russian propaganda,” spread by “biased media, like Fox News and Russia Today.”

According to Everstake, the false claims do not “correspond with reality” given that the majority of the funds already went toward helmets, bulletproof vests and night vision technology for Ukraine’s military, as the country’s Deputy Prime Minister Mykhailo Fedorov reported in August. The spokesperson added that the situation with FTX “does not affect the operation of Aid For Ukraine,” as the platform only used the exchange “a few times” to convert crypto donations to fiat in March and had no funds stored on FTX at the time of its collapse.

“Every time Russia is defeated on the battlefield, it starts looking for another way to cover up its military failures in the media by spreading fake news based on made-up assumptions,” said Everstake CEO Sergey Vasylchuk. “This time, they decided to use the collapse of FTX to spin yet another tale about money laundering. It is obvious that Western support of Ukraine hurts Russia as it leads to its losses on the battlefield. We know for a fact that every donation was spent for the benefit of Ukraine.”

One of the kernels of truth within the rumor surrounds Bankman-Fried admitting to being a “significant donor” to political candidates in the U.S. 2022 midterm elections, with the majority of his contributions going toward Democrats. On Nov. 29, the Texas Tribune reported that Texas gubernatorial candidate Beto O’Rourke — a Democrat who lost his race against incumbent Greg Abbott — returned a $1 million donation from SBF prior to election day.

But SBF has scoffed at claims he was helping the Democrats launder money via Ukraine. “I wish I could have pulled that off,” Bankman-Fried jokingly said in a Nov. 16 interview with Tiffany Fong addressing the rumors. “I was helping Ukraine launder funds for the Democratic Party? […] I wished I was part of an international conspiracy that interesting.”

Speaking to Cointelegraph, Vasylchuk said that Ukrainian government officials had been forced to respond to “serious people” inquiring about the online rumors. The Everstake CEO speculated that the recent shakeup at Twitter amid Elon Musk taking over as CEO had further opened the doors for conspiracy theories to run amok on the platform, like the one related to FTX and Ukraine’s crypto donations.

Related: Ukraine-based blockchain firm announces ‘we’re still hiring’ amid market downturn, war

“Society is blind to stop the spread of lying and propaganda,” said Vasylchuk. “We see how propaganda can influence like in Russia — [they fooled] millions of people. At the same time, I see them turn to [fooling] Americans, and social media can do the same. So, I’m really scared. I’m scared for the information and scared how it’s easy to manipulate or to force people to believe some type of this information.”

He added:

“This information was similar to information like ‘Ukraine developed battle mosquitoes which will bite Russians.’ […] I was thinking that American society is much more mature than it is in [Europe], and the people are actually able to feel the reality, the obvious bullshit, but unfortunately not.”

Vasylchuk reported that crypto donations through Aid for Ukraine had tapered off in recent months. Many crypto users are expected to send cash and tokens to various organizations as part of Giving Tuesday, or Bitcoin Tuesday, on Nov. 29.

National Bank of Ukraine releases draft concept for digital hryvnia

One of the design options for the Ukrainian CBDC describes the e-hryvnia available for usage in crypto exchange operations.

The National Bank of Ukraine (NBU) has introduced a draft concept for its central bank digital currency (CBDC) candidate digital hryvnia, or e-hryvnia.

Ukraine’s central bank on Nov. 28 released a statement on the concept of e-hryvnia, which aims to perform all the functions of money by supplementing cash and non-cash forms of the hryvnia as its key purpose.

The NBU said it has presented the e-hryvnia concept and continues developing the CBDC project with participants of the virtual assets market, payment firms and state bodies.

According to the announcement, the central bank is currently considering and developing three possible CBDC options, depending on design and main characteristics.

The first option describes the e-hryvnia for retail non-cash payments with the possible functionality of “programmed” money through smart contracts. A retail e-hryvnia would enable the implementation of targeted social payments and the reduction of government expenditures on administration, the NBU said.

The second CBDC option envisions the e-hryvnia available for usage in operations related to cryptocurrency exchange, issuance and other virtual asset operations. “The e-hryvnia can become one of the key elements of quality infrastructure development for the virtual assets market in Ukraine,” the announcement notes.

The third option includes the e-hryvnia to enable cross-border payments in order to provide faster, cheaper and more transparent global transactions.

“The development and implementation of the e-hryvnia can be the next step in the evolution of the payment infrastructure of Ukraine,” Oleksii Shaban, director of NBU payment systems and innovative development department, said in the statement. He added that a Ukrainian CBDC could have a positive impact on ensuring economic security and strengthening the monetary sovereignty of the state, as well as e sustainable economic growth.

Related: Russia aims to use CBDC for international settlements with China

According to the announcement, the Ukrainian Intellectual Property Institute registered the trademark “e-hryvnia” for the NBU in October 2022.

As previously reported, the NBU has been actively studying the possibility of issuing a CBDC in recent years, hiring blockchain developers and cooperating with major industry projects like the Stellar Development Foundation.

According to the regulator, the NBU launched a pilot project ​to issue the e-hryvnia for blockchain-based retail payments back in 2018.

Ukrainian pro-crypto groups announce Web3 roadmap

The roadmap proposes the launch of a regulatory sandbox and the creation of a national blockchain-backed realty register.

Blockchain4Ukraine — a group of pro-crypto Ukrainian lawmakers — and the citizen group Virtual Assets of Ukraine (VAU) revealed a joint roadmap for promoting and developing Web3 in the country. The document was signed by its co-authors on Nov. 14, according to regional media. 

The roadmap proposes a set of measures for promoting Web3, such as the launch of a regulatory sandbox for blockchain and Web3 projects, creation of a national blockchain-backed land and realty register, preparation of a “blockchain plan” to rebuild the country after the war, and integration of Ukraine into the European blockchain community.

VAU and Blockchain4Ukraine also intend to work on a self-sovereign identity pilot project and to seek ways of implementing blockchain into Ukraine’s healthcare and education systems.

The list of potential partners of the roadmap includes civil society and nongovernment organizations as well as business and scientific communities. The group working on the roadmap will prepare a set of bills to promote its initiatives on the legal level.

Related: Ukrainian art museum to preserve art and cultural heritage through NFT auction

In June, Ukraine became the third country outside of the European Union to join the European Blockchain Partnership, an initiative derived by the EU’s 27 member states to deliver cross-border public services. Back then, VAU CEO Konstantin Ermolenko revealed Ukraine’s interest in running test-node of the European Blockchain Services Infrastructure and pilot use cases of the cross-border public services based on blockchain technology.

In March 2022, Ukrainian President Volodymyr Zelensky signed the country’s first major cryptocurrency-related legislation, the bill “On Virtual Assets.” The bill establishes the National Securities and Stock Market Commission of Ukraine and the National Bank of Ukraine as two major regulators of the crypto market.

Since the beginning of the Russian invasion in February 2022, Ukraine has managed to gather over $100 million in cryptocurrency donations through its government-curated Crypto Fund of Ukraine.

What the Russia-Ukraine conflict has revealed about crypto

Cryptocurrencies are being used to provide military and humanitarian aid in the Russia-Ukraine conflict.

The Russia-Ukraine conflict has tested the capabilities of crypto in a real-world conflict where sanctions and inventive blockchain crowdfunding models abound.

The war, which is drawing into its ninth month, has uncovered a raft of blockchain benefits, such as the capacity to support humanitarian endeavors. It has also revealed how much control national authorities can exert over crypto networks.

Vadym Synegin, co-founder at IT and crypto solutions provider Tecor, told Cointelegraph that cryptocurrencies have a unique advantage in situations where there is an increased risk of money transfer interruptions due to the centralization of conventional systems.

“With most markets controlled by centralized authority figures that can easily buckle under the political tensions, the crypto markets remain more or less decentralized, meaning that their operational efficiencies during periods of crisis are further enhanced,” he said.

So, what other aspects has the Russia-Ukraine conflict revealed about crypto?

Crypto donations for humanitarian aid

The Russia-Ukraine conflict has shown that cryptocurrencies can be used for fundraising in military conflicts. Notably, the Ukrainian government began accepting crypto donations at the beginning of the year in a bid to enhance donor inclusivity, and this led to the creation of the Crypto Fund of Ukraine.

The nation’s Ministry of Digital Transformation is currently in charge of the fund, which was set up in conjunction with Kuna, FTX and Everstake to buttress Ukraine’s humanitarian aid and military programs. The project has enabled the Ukrainian government to raise over $100 million in cryptocurrency donations so far.

That said, some pro-Ukraine crypto fundraising groups have turned to novel crypto instruments such as decentralized autonomous organizations (DAOs) to raise funds for the nation.

The UkraineDAO, which is among the most prominent of the lot, was created in February for the sole purpose of providing monetary support to Ukrainian soldiers. The project’s co-founders include Russian critic Nadya Tolokonnikova, who is also a founding member of the Pussy Riot feminist protest group. Other UkraineDAO founding members include PleasrDAO and Trippy Labs, a generative NFT studio. The project has raised over $8 million so far.

Among the most notable successes of the UkraineDAO was the recent sale of a nonfungible token (NFT) of the Ukrainian flag that fetched just over $6 million in Ether (ETH). It is currently ranked among the top 20 most expensive NFTs of all time.

Recent: Does the IMF have a vendetta against cryptocurrencies?

Cointelegraph had the chance to speak with Kayla Kroot, the co-founder of the Koii Network, regarding the current use of crypto in the Ukraine situation. Her company is involved in the development of novel blockchain models, including Web3.

According to the executive, cryptocurrencies have enabled citizens caught up in the war to maintain access to their money during these trying times:

“Cryptocurrency was developed to help global citizens maintain control of their money.” 

Kroot also noted the increased use of digital coins by humanitarian groups operating in the nation. “Organizations such as World Central Kitchen performed crowdfunding campaigns. In WCK’s case, this involved accepting donations in ETH. These funds were dispersed with fewer restrictions and oversight, allowing money to more easily get to the hands of those who needed it most,” she added.

Scammers take advantage of well-wishers

While crypto donations have been helpful in furthering the Ukrainian cause, some malicious entities have blighted noble efforts by well-wishers.

Some scammer syndicates have attempted to beguile donors by pretending to be representatives of authorized crypto exchanges involved in Ukraine fundraising efforts. Cybersecurity experts estimate that millions of deceptive emails employing the tactic have been sent out so far.

Some of the emails contain messages of distress from cybercriminals purporting to be Ukrainians in dire need of financial aid.

The influx of such messages subverts the cause of helping Ukrainians by making it harder for the real victims to get the help they need.

There have also been reports of scam messages being spread on social media platforms. At this juncture, it is important to note that well-wishers should only donate their crypto via official Ukrainian government channels in order to avoid possible scams.

Besides fraudulent posts appearing on social media, scam messages soliciting crypto are also popping up on the dark web.

The dark web is an overlay internet network made up of unindexed websites that are invisible to standard browsers and search engines and can only be accessed using special browsers.

The dark web is intentionally hidden from regular users for a good reason. It harbors all manner of illegal activity that includes black markets for illegal drugs and guns. Blackhats also use the dark web to sell stolen personal credentials.

As such, there is little surprise that scammers are spreading fake messages on the dark web to cheat Ukraine supporters out of funds. Many of the messages have been found to contain links to phishing sites that are designed to steal crypto.

According to a McAfee investigation into the schemes, some of the websites utilize fake chatboxes to simulate user activity, while others make use of mock-up donation verifiers to look more authentic.

Early on in the Russia-Ukraine war, a more sophisticated group of fraudsters attempted to carry out a scam fundraising effort using the Peaceful World (WORLD) token. This is after the Ukrainian government announced an airdrop and then subsequently canceled it.

The scammers launched the fake airdrop hours before the government scrapped the move in favor of NFTs. Industry experts and security analysts were quick to point out discrepancies in the fake giveaway, thereby forestalling the scheme.

Governments can limit crypto

Satoshi Nakamoto, the pseudonymous creator of Bitcoin (BTC), developed the first cryptocurrency in order to devolve the control of money away from governments and centralized financial institutions.

However, the Russia-Ukraine conflict has demonstrated that it’s possible for regional blocs and major jurisdictions to impose bans and exert control over cryptocurrencies.

In October, the European Commission announced sweeping sanctions targeting Russian crypto custodial wallets under the control of European enterprises and exchanges. EU blockchain companies were additionally prohibited from providing crypto custodial services to Russian entities.

The new laws were enacted in response to Russia’s invasion of Ukraine in order to prevent Russia from evading sanctions.

Previous restrictions placed a trade and deposit limit of up to 10,000 euros on Russian crypto wallets and accounts.

Recent EU crypto enactments have forced some major exchanges, such as Binance and Coinbase, which have operations in Europe, to restrict services to Russian individuals and companies to avoid a regulatory clash.

Other regulated crypto exchanges such as Kraken, Crypto.com and Blockchain.com have also ceased providing crypto services to Russian citizens as a result.

Meanwhile, Russian authorities seem unsure of how to handle the flurry of crypto wallet prohibitions and the occlusion of major Russian banks from the SWIFT money transfer system. The ban on these systems has effectively locked out the nation from major international financial markets.

In July, the Kremlin passed a law that banned the use of cryptocurrencies for making payments. However, the Russian government recently changed its tone. In September, the Russian central bank and the Ministry of Finance agreed to allow the use of cryptocurrencies for cross-border payments.

Recent: Bitcoin miners rethink business strategies to survive long-term

The move was designed to promote the use of local crypto exchanges amid rising geopolitical tensions that left many Russians with limited options.

The Russia–Ukraine conflict has showcased the use of crypto in community effort settings for the common good. While the Ukrainian government has raised millions of dollars from direct crypto donations, some digital currency fundraising efforts have been undermined by scammers out to make a profit from the war.

More crypto advantages and limitations are likely to crop up as use cases emerge in more diverse environments.

What the Russia-Ukraine war has revealed about crypto

Cryptocurrencies are being used to provide military and humanitarian aid in the Russia-Ukraine conflict.

The Russia-Ukraine conflict has tested the capabilities of crypto in a real-world conflict where sanctions and inventive blockchain crowdfunding models abound.

The war, which is drawing into its ninth month, has uncovered a raft of blockchain benefits, such as the capacity to support humanitarian endeavors. It has also revealed how much control national authorities can exert over crypto networks.

Vadym Synegin, co-founder at IT and crypto solutions provider Tecor, told Cointelegraph that cryptocurrencies have a unique advantage in situations where there is an increased risk of money transfer interruptions due to the centralization of conventional systems.

“With most markets controlled by centralized authority figures that can easily buckle under the political tensions, the crypto markets remain more or less decentralized, meaning that their operational efficiencies during periods of crisis are further enhanced,” he said.

So, what other aspects has the Russia-Ukraine conflict revealed about crypto?

Crypto donations for humanitarian aid

The Russia-Ukraine conflict has shown that cryptocurrencies can be used for fundraising in military conflicts. Notably, the Ukrainian government began accepting crypto donations at the beginning of the year in a bid to enhance donor inclusivity, and this led to the creation of the Crypto Fund of Ukraine.

The nation’s Ministry of Digital Transformation is currently in charge of the fund, which was set up in conjunction with Kuna, FTX and Everstake to buttress Ukraine’s humanitarian aid and military programs. The project has enabled the Ukrainian government to raise over $100 million in cryptocurrency donations so far.

That said, some pro-Ukraine crypto fundraising groups have turned to novel crypto instruments such as decentralized autonomous organizations (DAOs) to raise funds for the nation.

The UkraineDAO, which is among the most prominent of the lot, was created in February for the sole purpose of providing monetary support to Ukrainian soldiers. The project’s co-founders include Russian critic Nadya Tolokonnikova, who is also a founding member of the Pussy Riot feminist protest group. Other UkraineDAO founding members include PleasrDAO and Trippy Labs, a generative NFT studio. The project has raised over $8 million so far.

Among the most notable successes of the UkraineDAO was the recent sale of a nonfungible token (NFT) of the Ukrainian flag that fetched just over $6 million in Ether (ETH). It is currently ranked among the top 20 most expensive NFTs of all time.

Recent: Does the IMF have a vendetta against cryptocurrencies?

Cointelegraph had the chance to speak with Kayla Kroot, the co-founder of the Koii Network, regarding the current use of crypto in the Ukraine situation. Her company is involved in the development of novel blockchain models, including Web3.

According to the executive, cryptocurrencies have enabled citizens caught up in the war to maintain access to their money during these trying times:

“Cryptocurrency was developed to help global citizens maintain control of their money.” 

Kroot also noted the increased use of digital coins by humanitarian groups operating in the nation. “Organizations such as World Central Kitchen performed crowdfunding campaigns. In WCK’s case, this involved accepting donations in ETH. These funds were dispersed with fewer restrictions and oversight, allowing money to more easily get to the hands of those who needed it most,” she added.

Scammers take advantage of well-wishers

While crypto donations have been helpful in furthering the Ukrainian cause, some malicious entities have blighted noble efforts by well-wishers.

Some scammer syndicates have attempted to beguile donors by pretending to be representatives of authorized crypto exchanges involved in Ukraine fundraising efforts. Cybersecurity experts estimate that millions of deceptive emails employing the tactic have been sent out so far.

Some of the emails contain messages of distress from cybercriminals purporting to be Ukrainians in dire need of financial aid.

The influx of such messages subverts the cause of helping Ukrainians by making it harder for the real victims to get the help they need.

There have also been reports of scam messages being spread on social media platforms. At this juncture, it is important to note that well-wishers should only donate their crypto via official Ukrainian government channels in order to avoid possible scams.

Besides fraudulent posts appearing on social media, scam messages soliciting crypto are also popping up on the dark web.

The dark web is an overlay internet network made up of unindexed websites that are invisible to standard browsers and search engines and can only be accessed using special browsers.

The dark web is intentionally hidden from regular users for a good reason. It harbors all manner of illegal activity that includes black markets for illegal drugs and guns. Blackhats also use the dark web to sell stolen personal credentials.

As such, there is little surprise that scammers are spreading fake messages on the dark web to cheat Ukraine supporters out of funds. Many of the messages have been found to contain links to phishing sites that are designed to steal crypto.

According to a McAfee investigation into the schemes, some of the websites utilize fake chatboxes to simulate user activity, while others make use of mock-up donation verifiers to look more authentic.

Early on in the Russia-Ukraine war, a more sophisticated group of fraudsters attempted to carry out a scam fundraising effort using the Peaceful World (WORLD) token. This is after the Ukrainian government announced an airdrop and then subsequently canceled it.

The scammers launched the fake airdrop hours before the government scrapped the move in favor of NFTs. Industry experts and security analysts were quick to point out discrepancies in the fake giveaway, thereby forestalling the scheme.

Governments can limit crypto

Satoshi Nakamoto, the pseudonymous creator of Bitcoin (BTC), developed the first cryptocurrency in order to devolve the control of money away from governments and centralized financial institutions.

However, the Russia-Ukraine conflict has demonstrated that it’s possible for regional blocs and major jurisdictions to impose bans and exert control over cryptocurrencies.

In October, the European Commission announced sweeping sanctions targeting Russian crypto custodial wallets under the control of European enterprises and exchanges. EU blockchain companies were additionally prohibited from providing crypto custodial services to Russian entities.

The new laws were enacted in response to Russia’s invasion of Ukraine in order to prevent Russia from evading sanctions.

Previous restrictions placed a trade and deposit limit of up to 10,000 euros on Russian crypto wallets and accounts.

Recent EU crypto enactments have forced some major exchanges, such as Binance and Coinbase, which have operations in Europe, to restrict services to Russian individuals and companies to avoid a regulatory clash.

Other regulated crypto exchanges such as Kraken, Crypto.com and Blockchain.com have also ceased providing crypto services to Russian citizens as a result.

Meanwhile, Russian authorities seem unsure of how to handle the flurry of crypto wallet prohibitions and the occlusion of major Russian banks from the SWIFT money transfer system. The ban on these systems has effectively locked out the nation from major international financial markets.

In July, the Kremlin passed a law that banned the use of cryptocurrencies for making payments. However, the Russian government recently changed its tone. In September, the Russian central bank and the Ministry of Finance agreed to allow the use of cryptocurrencies for cross-border payments.

Recent: Bitcoin miners rethink business strategies to survive long-term

The move was designed to promote the use of local crypto exchanges amid rising geopolitical tensions that left many Russians with limited options.

The Russia–Ukraine conflict has showcased the use of crypto in community effort settings for the common good. While the Ukrainian government has raised millions of dollars from direct crypto donations, some digital currency fundraising efforts have been undermined by scammers out to make a profit from the war.

More crypto advantages and limitations are likely to crop up as use cases emerge in more diverse environments.

What new EU sanctions mean for crypto exchanges and their Russian clients

Despite many popular exchanges curtailing their operations within Russia, several platforms continue to service the region as usual.

Nine months into the conflict between Ukraine and Russia, sanctions against the latter have continued to grow at an aggressive pace. This time around, legislators for the European Union announced that they are introducing a complete ban on all cross-border crypto payments between Russia and its citizens. 

To elaborate, a prohibition of all “crypto-asset wallets, accounts, or custody services, irrespective of the amount of the wallet,” has now been initiated by the EU in response to Russia’s continued annexation of Ukrainian land, repeated mobilization of troops within the country and threats of nuclear escalation.

It is worth noting that previous sanctions had limited cryptocurrency payments between Russian to EU wallets to 10,000 euros ($9,700). The new ban seeks to deprive the Kremlin’s military power while curtailing critical components of its industrial complex.

Russian crypto users under fire from all corners

In light of the EU’s aforementioned sanctions, a whole host of cryptocurrency exchanges popular in the region — including LocalBitcoins, Crypto.com and Blockchain.com — issued emails to their customers telling them to withdraw their funds as soon as possible since they would be unable to make use of their services henceforth.

It is worth considering that as of September 2022, LocalBitcoins accounted for a whopping 8% of Russia’s crypto trade volume, the exchange’s largest client base by far. Moreover, before the ban, Russian users were responsible for facilitating just under 20% of all total BTC trading volumes on the exchange.

Binance, one of the world’s largest crypto exchanges, is also working toward implementing the new restrictions. However, a representative for the firm told Cointelegraph that these changes may take some time to go live, with there being no set date for the same. Similarly, Bitfinex, an exchange that had previously spoken out against the growing sanctions being levied against Russian nationals, recently changed its tune, claiming that it may have to amend its policies if “directed by the regulatory authorities” by which they are governed.

Recent: Blockchain gaming adoption means more options for gamers

Lastly, earlier this month, popular blockchain developer Dapper Labs suspended Russian citizens from accessing its wide array of digital asset services. As a result, users from that side of the world will no longer be able to access the firms’ popular nonfungible token (NFT) marketplace alongside several other crypto products.

Impacts of the ban

To better understand the situation, Cointelegraph reached out to Ajay Dhingra, head of research and analytics for cryptocurrency exchange Unizen. Taking a more holistic approach toward the matter, he highlighted that one primary use case of digital assets is to assist citizens of a country at war to protect their savings, adding:

“The ban will bring pain to Russian retail and some financial institutions. Given the fact that BTC experienced sharp appreciation in price when the war broke out, European Authorities took note of this loophole in their strategy to curtail and suffocate Russia.”

Similarly, Przemysław Kral, CEO of Zonda — one of Eastern Europe’s largest exchanges by volume — told Cointelegraph that the sanctions, along with the EU’s yet-to-be-finalized Markets in Crypto-Assets regulation, which will be enforced by the EU’s Financial Action Task Force, can potentially redefine the region’s crypto landscape for the foreseeable future, adding:

“As the situation escalates, irrespective of their personal views on crypto regulation, the decision by exchanges to comply with the new EU sanctions is a moral and ethical responsibility that all companies should carefully consider.”

What happens to the ruble pairs held by these exchanges?

In the past, regulators have taken a heavy hand with exchanges that continue to allow citizens of blacklisted countries to trade on their platforms, which leads to the question: What will exchanges with massive volumes of rubles trading pairs do with these assets? Dhingra said: 

“This time, they will be cautious, given the brevity of the situation. The exchanges are now left with no option but to realize major losses on their balance sheets. However, the ban will bring decentralized finance back into the spotlight, as it provides a censorship-resistant and easily accessible infrastructure for people living in a geopolitical turmoil.”

Kral noted that as of now, it is unclear whether exchanges will be forced to return funds to Russian users, block access to them or freeze their accounts until sanctions are lifted. Lastly, he highlighted that Zonda closed all Russian-held accounts during the first round of sanctions back in May, returning all ruble-paired assets to their rightful owners.

Many exchanges still operational amid ban

As highlighted previously, even though Binance is still considering limiting its services for Russian users, it is currently operating as per usual. Similarly, United States-based exchange Kraken has not laid any impositions on its Russian clients, with there being no indication as to whether or not it decides to voluntarily adopt EU requirements.

Another popular exchange that has yet to initiate any sort of ban is Antigua and Barbuda-based FTX. The same has been the case for the popular Russian cryptocurrency platform Garantex, which still provides traders in the region with a wide range of advanced services such as futures and derivatives.

Other popular platforms operating in the region include Seychelles-registered Huobi Global, OKX, KuCoin and Mexc Globa. In fact, Singapore-registered Bybit told a crypto outlet that it will continue to stand by its ethos of freedom, transparency and decentralization and not impose any sanctions against Russian clients, many of whom may not even agree with the war or the stance taken by their leaders.

Recent: The state of crypto in Western Europe: Swiss powerhouse and French unicorns

Lastly, it should be noted that United Kingdom-based crypto exchange Exmo, which is extremely popular across Eastern Europe, sold its Russian business to a local vendor earlier this year. The platform continues to remain operational in Russia and its neighboring nations of Belarus and Kazakhstan via its Exmo.me domain name.

Thus, as the war between Ukraine and Russia continues, it will be interesting to see how crypto companies operating in the region adapt to new and shifting geopolitical realities. 

Ukrainian art museum to preserve art and cultural heritage through NFT auction

The Kharkiv Art Museum launched a new NFT collection on the Binance NFT marketplace to help raise funds for operations and the preservation of cultural heritage.

As the Web3 space expands, nonfungible token (NFT) use cases continue to develop past the hyped days of stagnant digital art collections. However, even within the art realm, NFT utility is being reinvented, as is the case with a Ukrainian art museum.

The Kharkiv Art Museum announced on Oct. 13 that its Art without Borders NFT collection is now available on the Binance NFT marketplace.

Art without Borders includes 15 pieces of art from the museum’s collection, with proceeds going to finance the museum and “save the cultural heritage of Ukraine,” as stated by the official announcement.

The museum is one of the oldest in Ukraine, with nearly 25,000 works of fine art by artists from Ukraine and around the world. Artwork by Albrecht Dürer, Georg Jacob Johann van Os, Ivan Aivazovsky, Simon de Vlieger and others is featured in the NFT collection.

Binance NFT head Lisa He told Cointelegraph that in a time of conflict, when donors are looking for a secure and sure way to give funds, NFTs offer reassurance:

“[NFTs] offer peace of mind and security for donors because all transactions are registered on blockchain technology. All donations to causes via NFTs are tracked and can’t be altered or deleted.”

The Binance exec continued to say that the transparency of the blockchain also allows donors to know when and if funds reached their desired destination.

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Museums have utilized NFTs as a means to digitalize art in the past such as the Royal Museum of Fine Arts Antwerp, which tokenized a piece in its collection worth millions of euros.

Art has even been NFT-ized in metaverse museums, like when Frida Khalo’s family brought a never-before-seen piece from their private collection into Decentraland.

Meanwhile, the city of Kharkiv has been subject to intense fighting in the ongoing conflict between Ukraine and Russia. Therefore, this collection’s utility can preserve culture currently at risk of being destroyed, which was the case in the infamous looting of the National Museum of Iraq in Baghdad in 2003.

Lisa He says the combination of  “nascent NFT technology and the long-standing Ukraine culture heritage in the NFT will support rebuilding culture and history in real life.”

Already NFTs have been used as an act of aid and resistance in Ukraine during these turbulent times. Proceeds from an NFT auction were used to help restore physical monuments that have been damaged duri the conflict.

The Ministry of Digital Transformation in Ukraine even launched its own digital NFT museum i to document and preserve a timeline of major events in the conflict.

Lisa He said Binance will continue to support NFT projects that create practical and scalable solutions for various social problems, “including the preservation of Ukraine’s cultural heritage.”

Blockchain could help anonymously document war crimes

Blockchain combined with decentralized storage could ensure data preservation and anonymity when reporting war crimes.

Human rights investigators appointed by the United Nations have confirmed that war crimes have been committed by Russian forces in Ukraine. The Independent International Commission of Inquiry on Ukraine was created in March 2022 to provide a framework for UN human rights investigators to report war crimes in the region. 

Erik Møse, chair of the Independent International Commission of Inquiry on Ukraine, stated in the UN’s article that “Investigators visited 27 towns and settlements and interviewed more than 150 victims and witnesses.” Møse also noted that “Sites of destruction, graves, places of detention and torture, as well as remnants of weapons,” were inspected.

While the report developed by the commission has allowed UN investigators to document war crimes in Ukraine, tools and protocols are still needed to enable individuals to accurately and securely report these acts. Additionally, the need to preserve war crime evidence has become critical as the war in Ukraine enters its seventh month.

Given these challenges, industry experts believe that blockchain technology has the potential to solve many of the issues faced by individuals and organizations documenting war crimes. For example, Jaya Klara Brekke, chief strategy officer at Nym — a platform powered by the Cosmos blockchain that protects the privacy of various applications — told Cointelegraph that Nym is developing a tool known as AnonDrop that will allow users to securely and anonymously upload data. She said:

“The intention is for AnonDrop to become a tool that democratizes the gathering of evidence that can be used to pursue human rights cases. In the current climate in Ukraine, this would be particularly important for the purpose of securely documenting and sharing evidence of war crimes anonymously.”

“The core technology of Nym is a mixnet, which takes data from ordinary users and mixes it together using encryption to make everything look identical. It protects against people watching the network, along with metadata surveillance and IP tracing,” she elaborated. While Nym provides an anonymity layer to allow users to transmit data without revealing who they are, information then gets stored on the decentralized storage network Filecoin. 

Will Scott, a software engineer at Protocol Labs — a company working with Filecoin on its decentralized storage solution — told Cointelegraph that some of humanity’s most important information is stored on Filecoin to ensure that data remains publicly available.

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A blockchain network combined with decentralized storage could be a critical tool for documenting war crimes since it allows individuals in regions like Ukraine to anonymously report, share and retain data. A Wall Street Journal article published in May 2022 stated that “Prosecutors say that, with Russian forces having occupied so much of the country, it is impossible to process all of the evidence of every potential war crime.” Moreover, Ahmed Ghappour, Nym general counsel and associate professor of law at Boston University, told Cointelegraph that it’s becoming critical for witnesses of human rights violations to come forward without fear of retaliation. He said:

“In Ukraine, where witnesses of war crimes are facing a technologically sophisticated adversary, network level anonymity is the only way to guarantee the safety and security needed to provide evidence to prosecute perpetrators.”

A work in progress

Although the potential behind AnonDrop is evident, Klara Brekke noted that the solution is still in its early development stages. “We took part in the Kyiv Tech Summit Hackathon this year hoping to find individuals who could help us extend AnonDrop’s functionality. For instance, AnonDrop’s user interface is not fully up yet and we still need to find a way to verify the authenticity of images uploaded to the network,” she explained. 

Ghappour elaborated that verification is the next critical requirement for making sure evidence uploaded to the Nym network can be used in court. “I think one of Russia’s greatest strengths in this war is the region’s ability to deny that any evidence is valid. Russia’s use of deepfakes and misinformation is another strength. We need to guard against these attacks.”

Ghappour mentioned that in order to combat this, image providence features must be implemented within AnonDrop to enable easy verification when documents are examined in a court of law. Even though such processes for image verification currently exist through tools like SecureDrop — a solution that allows individuals to upload photos anonymously for media outlets to use — Ghappour believes that these are limited to siloed organizations.

“We want to take image verification a step further by democratizing the process, ensuring this feature is available to users rather than just media outlets.” 

Once image providence is implemented, verifying war crimes could become easier for court officials. Brittany Kaiser, a human rights legal expert, told Cointelegraph that she believes such a tool could help advance the human rights documentation space, where often individuals feel too at risk to submit findings themselves. 

“Through images alone, it is possible to verify typical indicators of atrocity crime, including, but not limited to, mass graves, torture marks, binding of hands, executions and other violations of international human rights law that amount to war crimes or other atrocity classifications,” she remarked.

Given the potential for this use case, it shouldn’t come as a surprise that AnonDrop isn’t the only blockchain application focused on the preservation and verification of war crimes. Starling Labs — a Stanford-based research lab focused on data integrity using cryptography and decentralized web protocols — is also using blockchain technology to report war crimes. However, verifying the integrity of data remains the biggest challenge for both Nym and Starling Labs, even with image providence in place.

For instance, Scott pointed out that progress must be made in order to make sure images are legitimate and that verification works well. He further remarked that access to the internet in various regions of Ukraine is censored: “There are distribution questions that are important to consider here.”

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Challenges aside, it’s notable that organizations responsible for prosecuting war crimes are considering using technology to help advance traditional processes. For example, The International Criminal Court (ICC) in The Hague noted in its strategic plan for 2016 to 2018 that it could “support the identification, collection and presentation of evidence through technology.”

The report further noted that the ICC is interested in developing partnerships with non-governmental organizations and academic institutions to facilitate the use of technological advancements for war crime documentation. In the meantime, Ghappour emphasized that Nym will continue to push forward with enabling AnonDrop to be used in regions like Ukraine: “Russia has prolonged wars in the past, so we need to progress with this project no matter what.”