The Russia-Ukraine war has put cryptocurrencies in the spotlight. While it is being speculated that Russia may use them to get past the sanctions slapped against it by the US and European Union (EU), help is pouring into Ukraine in the form of cryptocurrencies. The country has raised donations worth over $45 million so far.
“At the retail and corporate level, people are rushing to get into crypto assets in these two nations already. The reasons being anticipated instability in their economies and depreciating fiat currency against the US dollar. Cryptos are acting like a store of value there,” says Sathvik Vishwanath, CEO of Unocoin, a crypto exchange in India.
The question then is: will the world finally have to sit up and accept cryptocurrencies as a valid form of transactions and investments? US Federal Reserve chairman Jerome Powell reportedly said in a meeting on Wednesday that the Russia-Ukraine war has underscored the importance of regulting cryptocurrencies.
EU looks at preventing use of crypto to avoid Russia sanctions https://t.co/cNf3IcDHtB— Financial Times (@FT) March 2, 2022
“[The Ukraine-Russia conflict] underscored the need for Congressional action on digital finance including cryptocurrencies. We have this burgeoning industry which has many parts to it, and there isn’t in place the kind of regulatory framework that needs to be there,” Powell was quoted as saying.
Some crypto experts feel that the Russia-Ukraine war can bring about a change in the narrative around cryptocurrencies and they may become more acceptable than they are now. “The fact that the Ukrainian government is also seeking contributions in crypto validates the use of blockchain-based money,” says Ajeet Khurana, a crypto expert.
Purushottam Anand, advocate and founder of Crypto Legal, a blockchain law firm says that if Russia indeed starts using cryptocurrencies to avoid the impact of recent sanctions, we may see jurisdictions worldwide, particularly the US and Europe, coming up with strict regulations around cryptocurrencies.
It is also possible that cryptos may find a larger place in conflict zones. “Crypto will emerge as an alternate payment mechanism, especially in geographies faced where geopolitical threats are imminent. When the fiat monetary system falls apart, crypto will be the only saviour,” says Sharat Chandra, vice-president, research and strategy, EarthID, a global decentralised self-sovereign identity management platform.
Constant digital innovation is also a factor that cannot be ignored. “Western democracies will continue to support financial technology and digital asset innovation, including but not limited to, cryptocurrencies. Bad guys will always try to exploit these innovations for their benefit which supports the need for appropriate regulatory guardrails (such as KYC/AML), fiat currency onramp protocols, and fraud prevention oversight by both private and public sector entities,” says Dan Kelly, a blockchain and crypto advisor based in the US.
Kelly noted that authoritarian regimes are in an inherent conflict with decentralized payment solutions like cryptocurrencies. “In general, they despise crypto use by their citizens as they lose control and visibility. On the other hand, foreign actors with mal-intent will always search for ways to bypass restrictions imposed on them,” he says.
The India Story
How India views cryptocurrencies in the future may depend on the government’s stance, which has been wary for now. Only recently, the government brought in steep taxation for cryptos
“If Russia is indeed able to avoid or mitigate the impact of economic sanctions by using Bitcoin and other cryptocurrencies, RBI, which has already highlighted its concerns around possible use of cryptocurrencies to escape monetary control of the central banks and governments, may take a conservative stand towards cryptocurrencies in India,” says Anand.
It may be noted that the Indian government is considering bringing in a legislation for a cryptocurrency bill, though there has been no concrete movement in that direction yet.
Vikram Subburaj, CEO, Giottus Crypto Exchange believes that India will continue to look at crypto/blockchain as an enabler of new technology with different use cases with defined procedures for customer identification.