How Ukraine embraced crypto to bolster its war effort

Ukraine’s experience showcases how cryptocurrencies can address fiat transfer limitations, as the government has already raised over $100m in crypto donations.

A stock photo of a pile of coins and a heart in colours of Ukrainian flag.

Prior to the Russian invasion, Ukraine was already one of the global leaders in terms of cryptocurrency usage. According to the Chainalysis 2021 index, the country ranked fourth in crypto adoption globally. In mid-March, President Zelenskyy signed a bill recognizing crypto as legal tender. In January 2021, the National Bank signed a deal with Stellar Development Foundation to develop Ukraine’s CBDC, the e-hryvnia.

Global Crypto Adoption Index
Source: Chainalysis

As the country found itself under attack, the Ministry of Digital Transformation focused on supporting Ukraine’s digital infrastructure, organizing media campaigns, and raising funds on social media. Initially, the ministry’s team only advertised crypto wallets on Twitter but later launched a dedicated website that accepts donations in 16 cryptocurrencies and fiat.

To accept and convert donations to fiat, Ukraine cooperates with FTX, staking platform Everstake, and Ukrainian crypto exchange Kuna. The funds are sent to the National Bank and used to pay for humanitarian aid and military equipment. In his interview with Bloomberg, deputy minister Alex Bornyakov said that about 40% of military suppliers agreed to accept payments in crypto. Ukraine's government chose to spend funds only on non-lethal equipment like bulletproof vests, helmets, first aid kits, and food rations, worrying that otherwise, it would discourage potential donors.

While many crypto exchanges and startup founders have donated money, including $10m from Binance, $5m from Polkadot founder Gavin Wood, and, recently, $5m from Vitalik Buterin, most transactions come from smaller contributors. According to the Coin Metrics, the average BTC donation sent has been 0.016 BTC (~$650), while the average donation of ETH has been 0.01 ETH (~$250). Most of the funds sent are the largest crypto assets, BTC and ETH, but Ukraine’s wallets also received NFTs, including a valuable CryptoPunk worth about $150,000.

To raise more funds, the ministry designed an NFT collection instead of the canceled airdrop. The NFT museum Meta History is responsible for NFT auctions, with each token consisting of a real news piece from an official source and an illustration by artists.

The coordinated effort of the global crypto community demonstrates that cryptocurrencies can be a potent tool for soliciting donations, avoiding limitations associated with traditional bank transfers. “Even if you manage to pay in fiat, a wire transfer takes a few days to reach the recipient. In the crypto world, it takes minutes,” said Alex Bornyakov in his interview with Financial Times. “Our banks were limited, there were restrictions on our use of fiat currencies and we were rapidly running out of supplies,” he added, highlighting the crypto’s role in providing Ukraine with the financial aid it desperately needed.