- Cash transactions in Ukraine are on the decline as citizens turn to cryptocurrencies as a way out.
- The country’s central bank announced restrictions on electronic cash transfers in lien with the imposition of the martial law.
- Stablecoins like USDT have seen their usage spike over the last few days.
Ukrainians are turning to cryptocurrencies for day-to-day cash transactions in the wake of the armed conflicts with Russia. Donations have also flowed in Bitcoin, Ethereum, USDT, and other cryptocurrencies in the defense of the country.
Fiat is “Dead”, Cryptocurrencies To The Rescue
Ukrainian citizens were on the short end of the stick as the country’s central bank ordered the suspension of the issuance of e-money to electronic wallets. The Ukrainian Central Bank clarified that the term e-money applies to fiat currencies that are typically held on platforms like Paypal and Venmo.
The decision to place a restriction of fiat transactions on citizens is in line with the imposition of martial law in response to Russia’s invasion. According to a statement released by the bank, access to the foreign exchange markets has been limited and a cap on cash withdrawals has been imposed. The nail on the coffin was the ban on the issuance of foreign currency from retail bank accounts.
As the restrictions have adverse effects on the lives of Ukrainians, a large number of citizens are turning to cryptocurrencies as an answer. According to the local cryptocurrency exchange, Kuna, there has been a spike in the Tether’s USDT usage amongst the local population.
Kuna’s CEO, Michael Chobanian told journalists that trust for the banking system and the local currency is low at the moment. “The majority of the people have nothing else to choose apart from crypto.”
The preference for USDT and other stablecoins is a result of the swinging volatility that has plagued the wider cryptocurrency markets. Bitcoin, Ethereum, and other altcoins recorded double-digit losses last week and stablecoins over a semblance of stability for the war-torn nations. Stablecoins have peaked in value with their market capitalization standing at just over $180 billion.
Apart from the use of cryptocurrencies in settling day-to-day transactions, the asset class has been used to raise donations for NGOs in the country. Following the restrictions on traditional fundraising platforms, the country has received over $7 million in cryptocurrencies since the start of the week.
Addresses for Bitcoin and Ethereum were shared on the country’s Twitter account and on the profile of the Deputy prime minister, leading to a spike in donations. Vitalik Buterin, founder of Ethereum noted that the accounts might have been hacked but a spokesperson confirmed the channels are secure.
“Cryptoassets such as Bitcoin have also emerged as an important alternative funding method,” said Elliptic, a blockchain analytic firm. “They allow for quick, cross-border donations, which bypass financial institutions that might be blocking payments to these groups.”