In the days following Russia’s invasion, many Ukrainians and Russians lost access to their bank accounts. Some people made a living off of cryptocurrencies.
When his cab driver informed him that his credit card had been refused, Artyom Fedosov was perplexed. Fortunately, this 27- year Ukrainian photographer, had a backup card. But, surprisingly, when he presented it, it didn’t work either. Fedosov tried to withdraw money from his debit account at an ATM as a final option. He was also rejected by the machine.
“That’s how I found out I’d lost access to my savings,” Fedosov told in a recent Zoom chat.
This “terrifying” incident occurred in late February, just days after Russia invaded Ukraine. Fedosov was in Kazakhstan, rather than his hometown of Kyiv. It was planned to be a week-long stay at the end of a photography trip to the Middle East, but Fedosov was unable to return home due to Russia’s invasion.
Fedosov has been surviving on cryptocurrency since his ill-fated taxi ride. He discovered a bitcoin ATM in Kazakhstan, where he was able to trade bitcoin fragments for Kazakhstani tenge. He’s subsequently gone to Germany and created a bank account in Kazakhstan, which he funded entirely from cryptocurrency sales. Fedosov is also selling images as NFTs (people buy them in ether, which he converts to cash) to supplement his money, which he estimates will cover a few more months’ worths of expenses.
Fedosov is one of 5.5 million people in Ukraine who hold cryptocurrencies. Crypto enthusiasts rejoice at his ability to live entirely on bitcoin and ether. They argue that circumstances like Fedosov’s, in which the financial system stutters or fails, are precisely why Bitcoin was founded. Holders can access their bitcoin with nothing more than an internet connection and a 12-word seed phrase if they use a cryptocurrency wallet instead of going through an intermediary exchange like Binance.
In the days following the invasion, millions of Ukrainians and Russians lost complete access to their money. Queues of people snaked around city blocks in both nations, hoping to get access to ATMs. Cash withdrawals were promptly restricted by banks. This was especially noticeable in eastern Ukraine, where the majority of the fighting is taking place. Donetsk’s central bank, which serves a population of 2 million people and has declared independence from Ukraine, has limited individuals’ withdrawals to $130 each day. Anecdotal evidence suggests that folks in the east are unable to withdraw their money or use their credit cards.
“It was insane,” Fedosov remarked. “The rules would change multiple times a day at first.”
Thankfully, banks’ greatest worries have yet to come true. The majority of Ukrainians, including those living abroad, such as Fedosov, have regained restricted access to their funds. Nonetheless, the situation remains tense. Both Russia’s and Ukraine’s central banks have imposed limitations on foreign currency withdrawals. PrivatBank, Ukraine’s largest commercial bank, made an appeal on Twitter for armored trucks to deliver cash to ATMs. Russians who were worried about the impact of sanctions on the currency chose to invest in bitcoin in the days after the war broke out. (Since the invasion, the ruble has lost about 30% of its value against the dollar.)
“Unfortunately, Bitcoin is the perfect conflict asset,” said Sam Callahan, an analyst at Swan Bitcoin. “You have riches stored in your head with just 12 words, which is vastly different from gold or art in banks or vaults. People can cross the border with nothing that can be confiscated and have all of their wealth with just 12 words in their heads.”
In traditional finance circles, Callahan’s assertion would be controversial. Critics argue that cryptocurrencies are too volatile to operate as inflation hedges, let alone as a hedge against the collapse of a monetary system. However, after two years of wild price swings, it’s a good reminder that bitcoin and other cryptocurrencies were intended to be more than just speculative investments.
Cryptocurrency has already played a significant part in the conflict. By just exposing its bitcoin and ether wallet addresses on Twitter, the Ukrainian government was able to generate more than $60 million for the opposition movement. Millions more have been raised for local charities and non-governmental organizations. However, not all crypto possibilities are bright. Some fear that Russian oligarchs will utilize cryptocurrencies to circumvent the West’s historic sanctions against Russia. Fedosov is concerned that, just as worldwide charities are likely to copy Ukraine’s crypto fundraising, authoritarian regimes in Iran and Syria may follow Russia’s lead if the country can escape Western sanctions by using bitcoin and ether.
This, according to Callahan, is quite implausible. Bitcoin and ether have a combined market cap of approximately a trillion dollars, much too small for a country the size of Russia to seriously avoid sanctions. Some oligarchs may be able to shift money around, but Callahan believes it would be difficult to convert big sums of money from bitcoin to fiat currency without triggering blockchain analysis businesses. Nonetheless, he admits that bitcoin can be used for bad purposes.
He explained, “It’s an open-source network, it’ll be used by enemies, it’ll be utilized by friends.” “It will be used by drug dealers as well as charitable organizations. A surgeon can use a knife, but a killer can also use one.”
Fedosov’s story had a happy ending. He claims to have roughly $5,000 in the ether since he converted the money to ether three months before the invasion in order to start trading nonfungible tokens (NFTs), which are recorded on a blockchain. Fedosov only possesses bitcoin since he worked for a Dutch company in 2017 and said that receiving his compensation in bitcoin was easier and faster. The residual fraction of a bitcoin in his wallet has climbed in value from a few hundred to a few thousand dollars in the years since he moved to new employment.
Fedosov saw bitcoin as a new alternative to regular money at the time. Now he believes it is just as trustworthy — and is grateful he didn’t spend his last bitcoin all those years ago. “It’s just chance, basically,” he said when asked how he had crypto to fall back on.