Ukraine has recently located and taken control of a crypto wallet  allegedly involved in raising Russian funds to support military efforts in the invasion of Ukraine. According to the Security Services of Ukraine (SSU), they have blocked Russian crypto wallet used for sponsoring the war in Ukraine. 

The wallet belongs to a self-proclaimed volunteer for the Russian Federation's invasion of the country. SSU has also detained the person and is undergoing further investigations. 

## Russian crypto wallet holding over $19,500 seized

Ukraine’s SSU also shared that the account had cryptocurrencies worth up to $19,500. The intelligence agency is currently tracking the previous transfers. Moreover, they have not decided yet on whether they will transfer the assets to Ukrainian jurisdiction.

The SSU gathered intel from several international cryptocurrency firms. And they used a specified ‘mechanism’ to seize the Russian crypto funding. 

## Revelations from the investigation 

The national police and the Prosecutor General carried out the investigation. The investigations revealed that the alleged Russian military volunteer used a significant amount of the funds to buy weaponry. It was to facilitate the separatist militants from Luhansk and Donetsk People’s Republic (L/DNR). 

Moreover, it was revealed that the alleged person was running campaigns on social media to raise funds through payments in ccryptocurrencies. Since the start of the Russian invasion, he has constantly been creating digital content and sharing content with others. However, they did not disclose the identity of the person yet.

## Crypto and the Russia-Ukraine conflict

Digital assets have been a part of the Russia and Ukraine war since the beginning. These assets have been used to facilitate both countries’ militaries. Previously, cryptocurrency investors started a campaign named ‘[Aid for Ukraine’](/news/article/ukraine-crypto-aid). This drive collected more than $54 million for the Ukrainian cause. Moreover, the country also imposed a [crypto ban](/news/article/ukraine-cryptocurrency-ban) to stop the flow of money out of the country. 

On the other hand, Russia is also using cryptocurrencies to bypass international sanctions. It recently raised over 2.2 million in [Russian crypto](/news/article/crypto-russia) funds.



Ukraine snags Russia crypto wallet funding invasion

Ukrainian Deputy Prime Minister revealed that the crypto community had contributed [$54 million in crypto funds](https://cointelegraph.com/news/aid-for-ukraine-s-54m-crypto-fund-buys-vests-scopes-and-uavs) through "Aid For Ukraine" initiative to support the country's military efforts against Russia.

On Thursday, Ukrainian Deputy Prime Minister Mykhailo Fedorov's disclosed via his Twitter post that the $54M was channeled through the Ukrainian government-run crypto donation initiative "Aid For Ukraine."

The crypto fund initiative operates by transferring cryptocurrency to the crypto exchange FTX, which converts cryptocurrency into fiat currency, which is then withdrawn and transferred to the National Bank of Ukraine.

## Funding received and its usage by Ukraine

According to Ukrainian Ministry of Digital Transformation, the initiative received $54 million in the form of 595 [Bitcoin](/coins/btc) worth $13.9M, 10,190 Ether worth $18.7M, USD Coin worth $2.2M, and Tether worth $10.4M.

The cryptocurrency payments have gone toward military equipment, hardware, and munitions, including unmanned aerial vehicles (UAVs) worth $11.8 million, which are typically used to locate enemy troops and targeted attacks.

Among other army and medical accessories, the donations also included $6.9M for armour vests, $3.8M for field rations, $5.2M for anti-war media drive, and $5M for "weapons of the Ministry of Defense request.”

"Crypto is playing a critical role in Ukraine's defence," said Deputy Minister of Digital Transformation Alex Bornyakov on the government-affiliated donation website.

Founder of the Ukrainian crypto exchange KUNA Mike Chobanian added that the crypto community's contributions had demonstrated blockchain technology's influence on nation-states, claiming that it can serve as a "backbone of global security" in times of crisis.

However, the Aid For Ukraine crypto fund is not the only campaign raising funds to support Ukrainian defence efforts. The Reserve Fund of Ukraine, Come Back Alive, UkraineDAO, and Unchain Fund have also contributed funds in the seven-figure range. However, the amount of cryptocurrency-based funds they've received hasn't been disclosed since March 2022.



Crypto has funded $54M to Aid for Ukraine

## Is there a Ukraine cryptocurrency ban or not?

The National Bank of Ukraine has [implemented restrictions](https://www.kinstellar.com/locations/news-deals-insights/detail/397/1720/national-bank-of-ukraine-imposes-restrictions-on-the-purchase-of-cryptocurrencies-and-other-virtual-assets?msclkid=352c5177cf7e11ec8cedb74a0cc8134e) regarding its cryptocurrency transactions to limit the flow of money out of the country as it continues to operate under martial law.

Since the Russian invasion, $1.7 Billion was transferred out of banks in Ukraine in March and a further $900 million so far in April.

The ban is a temporary measure. It states that Ukrainians who want to buy cryptocurrencies will have to use a foreign currency other than UAH. The total monthly limit of purchases is limited to UAH 100,000 ($3,300).
The National Ukraine Bank sees crypto purchases, deposits via electronic wallets, and virtual asset purchases as quasi-cash transactions. However, regular payments made abroad and locally for goods and services do not fall under the bracket of new restrictions.

The National Bank of Ukraine believes the changes will help improve the country's fortune in the foreign exchange market. This is important for further reductions in restrictions, which will take some pressure off international reserves in Ukraine. The restrictions have raised some questions as the government of Ukraine was actively working to legalize cryptocurrencies a few days prior.

Before the invasion of Ukraine by Russia on February 24, the country was trading more cryptocurrencies than fiat. Just six days before, a bill was passed legalizing cryptocurrency and putting its regulation under the governance of the National Commission on Securities and Stock Market.

Since the war started, Ukraine has used cryptocurrencies to raise capital for the war effort. The country announced on February 26 that it would accept donations in the form of crypto, with links to two crypto wallets provided for them to receive [Bitcoin](/coins/btc), Ether, and Tether. According to a leading analytics firm within the crypto space, this led to $63.8 million being raised with more than 120,000 crypto asset donations. But as the war continues to rumble on, Ukraine’s national bank believes that if large amounts of cash leave the country, it will put significant pressure on its currency. It wants to avoid what happened to the Russian ruble shortly before the war began. 

There, food prices went up considerably, prices of imported goods skyrocketed, with some foreign-made cars more than doubling in price, and there was a lack of imports. An economist from Gazprombank predicted that annual inflation will stand at 27% by the middle of 2022. However, the ruble has returned to pre-war levels in response to sanctions from the West.

NBU believes the move to limit cryptocurrency transactions is important, even though the FX market has been balancing over the past few months. It fears that large volumes of foreign currency purchased by banks seeking international settlements will negatively affect the currency. The World Bank predicts that Ukraine's GDP will fall by 45% this year.



Ukraine Cryptocurrency Ban; What's Happening?

[Bitcoin](/news/category/bitcoin-news) traders woke to yet more shock Monday morning as the price of the asset tumbled to further localised lows.

At time of press, the price of the world’s number one digital asset sat at $33,728 – a fall of 5.52% in the last 24 hours. However, with the price of Bitcoin bottoming at $33,243 at 11:09 UTC this morning the current price shows that there are buyers at this level but as you may well imagine traders and investors are treading with extreme caution. 

Bitcoin wasn’t the only crypto to experience a devastating fall in value. The entire market also dropped sharply and currently stands at $1.54 trillion representing a fall of 7.01% in the last 24 hours.

## Outside factors

With market and network fundamentals at their strongest in years many investors are looking for outside factors as the reason behind the latest market crash. Tensions between Russia and NATO led allies continue to simmer over a Russian military build up at the Ukrainian border and while Russia insists it has no plans to invade, the USA and the UK have already told their embassy staff to begin making plans to leave the country. In contrast, the EU have no plans to fly diplomats out of Ukraine and is at a loss to explain why the USA and UK have given the green light adding ‘the US has not given any clear justification for its decision’.

As we reported on Friday, cryptocurrency and digital assets are still seen by many as risk-on investments which in times of uncertainty are often the first to be sacrificed, regardless of market strength.

However, there are other angles at play in this situation which many in the crypto community believe are having an impact on market activity. The US have threatened Russia with economic sanctions which will ‘bring the country to its knees’ should the country decide to stage an invasion of Ukraine. In practical terms this means deactivating Russia from the SWIFT network which has been used by every nation state to transfer capital around the world since 1972.

## ‘Alternative rails of finance’

In retaliation to the threat from Joe Biden, Russia have spoken of using ‘alternative rails of finance’ which many people believe is a nod toward distributed and decentralised networks able to move large amounts of capital such as Ripplenet or Stellar Lumens. However, with both of these firms originating in the US it is hard to believe Russia would choose to adopt their services. That being said the nature of many cryptocurrency networks is borderless and the vision they hold for the future is one of harmonious trade with drastically reduced friction in terms of policy, regulation and cost.

The last thing the world needs right now is yet another conflict and personally speaking I don’t think that is going to happen. I do believe however that a movement away from out of date and weighted legacy payment systems such as SWIFT towards the large scale use of decentralised and distributed networks that enable a fairer and balanced global economic environment is only a matter of time. However what time frame this financial transformation occurs on is anybody's guess.


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