Ukraine, which has been staunchly defending against the Russian invasion, says it has opened up a new source of financial support: people from around the world who have donated millions of dollars directly to military efforts through cryptocurrencies such as bitcoin.

Since February 26, when Ukrainian officials began tweeting calls for cryptocurrency donations, the Ukrainian government has said it has received nearly $ 67 million from its $ 200 million target on Saturday. “Today, the crypt plays a significant role in the defense of Ukraine,” – wrote on the national website of donations, Deputy Minister of Digital Transformation Alexei Barnyakov.

Ukraine spent about $ 34 million on funds received last week, converting about 80% into traditional currencies and using the rest for sellers who already accept cryptocurrencies, Barnyakov said in response to an e-mail question.

The funds raised in cryptocurrency are only a small part of the total donations received by Ukraine. After raising up to $ 12 million on March 2, cryptocurrency donations declined, although popular say the unexpected initial surge could inspire other efforts to raise cryptocurrencies for humanitarian or defense purposes. Officials said the speed with which they can use cryptocurrency donations has made them useful.

The downside of this ease of transfer, of course, is that cryptocurrencies still remain a magnet for fraud and are the currency of choice for criminal networks. On Tuesday, the head of the European Central Bank Christine Lagarde warned that crypto-assets “are used as a way to circumvent sanctions” against Russia, but did not provide details, except that global transfers of rubles to cryptocurrencies are growing sharply. .

Michael Chobanyan, founder of the Ukrainian cryptocurrency exchange, is one of several people helping the Ukrainian government manage donations through an informal agreement, Barnyakov confirmed.

“We buy so many life-saving things every day and stop aggression, so this is the beginning of a new world,” Chobanyan said in a voice message sent via Telegram.

Chobanyan said he does not receive payment for his work, but admitted that part of the funds is converted through his cryptocurrency exchange Kuna.

“This is, of course, the first time,” said Bennett Tomlin, who investigates cryptocurrency fraud and hosts the Crypto Critic’s Corner podcast. “We have never before seen a sovereign nation fund its crypto defense efforts. This proves a lot of arguments about the crypt. ”

This argument is that cryptocurrencies allow you to freely send and receive valuables across borders through networks that cannot be easily censored or closed because there is no single person responsible. Proponents also argue that cryptocurrency does not require users to trust financial institutions because the system is controlled by code that anyone can verify, and transactions are seamlessly recorded in distributed public digital books known as blockchains.

Donations to Ukraine are a kind of stress test for these claims, some of which were better than others.

For example, services such as cryptocurrency exchanges do serve as gatekeepers in part because many have to collect personally identifiable information about the people who use their services. Two major cryptocurrency exchanges, Binance and CoinBase, took steps to restrict the use of some of their services in Russia earlier this month, although they have not responded fully.

The publication around Ukraine’s call for donations also attracted fraudsters who tried to profit from the goodwill of donors. Hillary Allen, a professor at the American University School of Law who wrote a book on the risks that cryptocurrencies carry for financial systems, said anyone who donates should look closely at all participants.

“Who gets the crypt? Who will convert the crypt? You have to think of them the same way you think of any other charity or nonprofit you donate to, because they are just as intermediaries, ”Allen said.

Many donations to Ukrainian accounts can be verified using publicly available tools that track cryptocurrency transactions, as well as transfers made from accounts controlled by Ukraine.

Tuan Fan, a cybersecurity specialist who specializes in blockchain forensics, researched the flow of money to some Ukrainian accounts and from them in part because he wanted to make a donation himself. He was born in Vietnam and said he was eight years old when North Vietnamese communist troops captured Saigon in 1975.

“I’m old enough to remember what happened, so I feel very sorry for the Ukrainians,” said Fan. “I wanted to make sure that the address where I was sending my donation was in the right places. There are a lot of scams, so you need to be especially careful. “

Another problem posed by accepting cryptocurrency donations is the ability for people to send spoiled assets obtained as a result of crime or fraud, said Ukrainian cryptocurrency lawyer Artyom Afyan.

Even if part of the donated funds was obtained through illegal activities, he said: “I think if you compare the risks and benefits for Ukraine now, Ukraine uses every penny, every chance to support people, support the army, so this is not the time Ukraine can choose a lot. “

In total, donations of cryptocurrency still account for about 1% of Ukraine’s pre-war defense budget, according to a report by the Congressional Research Service, updated in January. The Ukrainian government also receives assistance through many other channels, although not all of them come directly to the government.

Congress has allocated $ 13.6 billion to Ukraine, and President Joe Biden has promised an additional $ 800 million in military assistance following Ukrainian President Volodymyr Zelensky’s address to U.S. lawmakers last week. The United Nations has raised about $ 618 million for Ukraine from a $ 1.1 billion target and asked for another $ 550 million to support refugees. The European Union has promised 500 million euros for a humanitarian response, as well as additional funds to support Ukraine’s budget.

Last week, Zelensky signed a regulatory framework in the field of cryptocurrencies, which, according to Barnyakov, solves the former gray area in the country’s laws.

Afian, a Ukrainian lawyer, was involved in drafting the bill and argued that Ukraine is on track to become more committed to cryptocurrency. So far, donations, he added, could “make governments make sure cryptocurrency work can be formal, transparent and well-managed.”

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