Russians and Ukrainians turn to crypto to ensure access to money

Daily trading volume of both the Russian rouble-Bitcoin and Ukrainian hryvnia-Bitcoin jumps almost 270%

Bitcoin, which was trading at $42,441.90 at 9.43pm UAE time on Thursday, has jumped almost 8.5 per cent in the past five days. Reuters

The Russia-Ukraine crisis has spurred investment in cryptocurrencies as more Russians and Ukrainians move towards the digital assets in the hope of keeping their money accessible.

The daily trading volume of both the Russian rouble-Bitcoin and Ukrainian hryvnia-Bitcoin have risen close to 270 per cent, according to research from Bankless Times.

“With citizens of both nations anxious about the future of their national currencies, recent data suggests that users have been flocking to crypto instead as a safe haven,” Khashayar Abbasi, an author with Bankless Times, said.

“From February 20 onwards, there is a clear uptick in trading volume for rouble pairs. A massive spike can be seen on [February] 24, which was the very day that Putin authorised special military operations in Ukraine,” Mr Abbasi said.

A similar pattern can be seen for Ukrainians, who may be seeking crypto exposure fearing collapse of their banking system. Owing to the Russia’s military offensive, many Ukrainians have fled their homes, leaving most of their possessions behind to escape the violence.

“By exchanging their assets into crypto, Ukrainians have the means to escape the country and carry some of their wealth with them,” Mr Abbasi said.

After initially falling to about $34,000 after Russia’s advance into Ukraine, Bitcoin has surged about 25 per cent since February 24.

It has risen almost 8.5 per cent in the past five days, and was trading at $42,441.90 at 9.43pm UAE time on Thursday.

Ether, the second-largest cryptocurrency, was trading at $2822.32 at 9.45pm UAE time. It has surged 1.4 per cent in the past five days.

On Monday, Russia’s central bank imposed capital controls and more than doubled interest rates to 20 per cent, their highest in nearly two decades, after the US and EU allies imposed tighter sanctions in response to its military offensive in Ukraine.

Ukraine, which has received a donation worth $33.8 million in digital currency since the start of Russia’s invasion, has also requested cryptocurrency exchanges such as Coinbase and Binance to impose a blanket ban on Russian users.

Investors at large are viewing cryptocurrencies as a good place to store assets.

Kyle Waters, a research analyst at Coin Metrics, said crypto trading data confirms that recent geopolitical events have “more generally” increased demand for cryptocurrency, which can be transferred anywhere and without the need for a third party.

“This could go for anyone, and certainly could include everyday Russian and Ukrainian citizens trying to escape a devaluing local currency,” Mr Waters said.

Unlike fiat currencies, which must be moved through various third-party institutions, cryptocurrencies can be transferred from one user to another, dodging government sanctions and other restrictions.

Cryptocurrency exchanges are still trying to figure out how to deal with western sanctions against Russia.