Ukrainian Refugees: With their national banks blocked, Ukrainians are crossing borders with their crypto economies, ensuring their financial survival.
The day Russia started a war with Ukraine, Fadey woke up at 9 a.m. He received a flood of Telegram messages from friends. They asked him what was happening in western Lviv, where he lived. After a quick review of the news, he realized that his country was under siege. He decided to flee to the border, aiming for Poland.
Fadey is the pseudonym used by a 20-year-old Ukrainian refugee. He must protect his privacy. Ukrainian citizens between the ages of 18 and 60 are conscripted into the army. He wanted to escape front-line service. This meant he had to find a way to cross the border before the authorities could close it. His girlfriend also needed to escape. To do this, they needed two things quickly: a negative Covid test result and money.
He said, “I couldn’t withdraw money because the queues at ATMs were very long and I couldn’t wait that long.
Instead, he hit Bitcoin.
Fadey says he did a peer-to-peer (P2P) exchange with a friend. He transferred $600 in Bitcoin to his friend’s wallet, and his friend gave him US dollars. He then used the fiat to pay for a bus across the border. The remaining money paid for a night in a hostel for him and his girlfriend, and food.
The speed and ease of this cryptocurrency transaction proved crucial. Within two hours of Fadey’s safe passage into Poland, Ukraine closed its borders to all men of fighting age.
Ukrainian Refugees: Crossing the Border
During his journey across the border, Fadey placed a USB stick in his pocket. It contained 40% of his savings, or about $2,000 in Bitcoin. This USB key, associated with a unique access code, has become the key to his financial survival. He said, “I could just write the password down on a piece of paper and take it with me.”
In Poland, there are more than 175 Bitcoin ATMs, allowing refugees who fled with Bitcoin to withdraw them in cash.
His experience highlights some of the most important characteristics of Bitcoin. Borders do not limit cryptocurrency. It does not require a bank. Access to it is linked to the owner by a password. All of this makes theft much more difficult than money.
Over the past month, nearly a quarter of Ukraine’s population has been forced to flee their homes. The war put a strain on the country’s financial system. As the invasion progressed, ATMs across the country began to run out of cash. Some people were in long lines to get their money. When they arrived at the ATMs, they had to pay high fees and were not allowed to withdraw more than $33. They also couldn’t transfer money online using their domestic bank accounts. The central bank suspended electronic cash transfers the same day Russia attacked the country.
It was the perfect storm to make the real case for cryptocurrencies. Borders closed. A currency that depreciates rapidly. The threat of Russia taking over the country. The displacement of the Ukrainian currency – the hryvnia – in favor of the ruble. It was an urgent, real, and chilling example of how cryptocurrencies can change survival outcomes.
power in crypto
Brian Mosoff is the CEO of Toronto-based investment platform Ether Capital. He said, “Crypto is a very powerful thing for a group of people who don’t have financial or political stability right now. They have the ability to store their money in some type of asset or product that can basically be kept in a password.
Within hours of Russia’s attack on Ukraine, the country’s financial system began to show signs of strain. Ukrainian refugees who were considering fleeing were blocked.
Alex Gladstein is the chief strategist of the Foundation for Human Rights, which has supported activists in Ukraine since 2009. He said: “Within hours, the country’s economy collapsed. Everything was frozen. As a result, we were dealing with a war economy. It happened in a few days. We are talking about 24 to 48 hours.
Fadey says he is unable to transfer his fiat savings from his Ukrainian bank account to himself in Poland. However, cryptocurrencies have mitigated the effects of this situation.
Its crypto stash is mostly in Bitcoin. After that, he owns Monero, which he keeps on the Binance cryptocurrency exchange.
Alex Hammond is a free trade expert at the Institute of Economic Affairs. He spent several months in Ukraine last year and is currently in Poland. He said it was difficult to withdraw money from Ukrainian banks in the weeks leading up to the invasion. “For weeks before the invasion, most Ukrainians I knew actively tried to withdraw as much money as possible from their Ukrainian bank accounts.” He said they transferred funds to UK banks, US banks or exchanged funds for cryptocurrencies.
Maria Chaplia, for example, is a Ukrainian citizen currently living in Poland. She initially became interested in cryptocurrencies when her Ukrainian bank wouldn’t allow her to withdraw a large amount of money. The fees charged by PayPal were more than she wanted to pay. “With cryptocurrencies, it was much easier.”
In Poland, trying to access money held in Ukrainian accounts is associated with similar difficulties. “Do you want to access your Ukrainian bank account in Poland? Good luck!” said Gladstein.
Even after the introduction of laws protecting asylum seekers, Gladstein warns that most Ukrainian refugees will not be able to simply walk into a bank in Poland and open a bank account.
Pablo Villalba is the CEO of Kimchi Fund, which invests in various cryptocurrencies. He says, “Not everyone has a cryptocurrency wallet. But those who have one treat it like a bank account and transact in it in times of crisis.
Ukrainian Refugees and the Bitcoin Economy
Long before the war gave Ukrainian refugees a reason to turn to Bitcoin, Ukraine was one of the most progressive cryptocurrency jurisdictions in the world. The country ranks fourth in the world in terms of adoption of digital assets. Earlier this month, the country passed a bill legalizing cryptocurrencies.
Gladstein said Eastern Europe has long been interested in digital assets, and Ukraine in particular is a well-known tech hotspot. “There are a lot of Ukrainian exchanges, companies and even developers. They all have phones. It’s a very well-connected and IT-centric country, probably more so than America.
This technical knowledge was especially useful when Ukrainians turned to their cryptocurrency wallets as the only way to access their savings.
Recent advancements in payment technology have made cryptocurrency transactions easier than ever. The Lightning Network is a payment layer built on top of Bitcoin’s base layer that enables virtually instantaneous transactions.
Some Ukrainians use it to facilitate peer-to-peer transactions. Others have found that Lightning is a fast and cheap way to receive donations and remittances from anywhere in the world.
The payment process is simple and takes less than 60 seconds. Users can download an app such as Muun Wallet. They then enter a four-digit PIN and begin sending and receiving cryptocurrency payments simply by showing the QR code.
Said Gladstein, “Sitting in California, I can send you any amount to your phone anytime. We don’t have to worry about being a refugee. It doesn’t matter if you don’t have a Polish passport or bank account. None of those things matter.
Give cryptocurrencies a chance
Constantin Kogan is co-founder of a blockchain-based gaming ecosystem. Its team members are located in both Ukraine and Russia. Kogan says one of his Ukrainian employees stayed put, but sent his wife and children to the border with a cryptocurrency wallet.
The employee was not sure where his family was or what border they had crossed. However, he had a plan for financial security: he regularly deposited money in his wife’s cryptocurrency wallet. He keeps most of his net worth (around 60%) in cryptocurrencies, mostly stablecoins.
Chaplia says many of his friends in Ukraine “have a very, very deep interest in cryptocurrencies.” For her, moving part of the money to Bitcoin, Ethereum and Tether was like digital gold. It’s a safe way to store money and forget about it. “I have to admit I was skeptical about cryptocurrencies, but because of the war I had to give them a chance.”
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