In recent years, Ukraine has emerged as a front-runner in the adoption and utilization of cryptocurrencies to fund its military defense initiatives. Recognizing the potential of digital assets quickly, both in freedom from traditional fiat gatekeepers as well as the speed of transaction, the Ukrainian government fully embraced the concept of crypto fundraising as a means to bolster its defense capabilities (let's be honest, the country had nothing to lose at the time either being fully invaded and on the verge of being wiped out at the time by early Russian forces). So it makes for a good case study how the digital finance tool worked in terms of use as a military resource.
History Repeats Itself
For anyone who has studied wars, particularly those in the 20th century, financing a war is as essential has having the soldiers and armament to fight it. Gold, for example, has been repeatedly the go-to resource during wartime by which to buy materials and resources to continue the fight, and stealing the gold of countries invaded was a top priority in both World War I and World War II. All sides did it. The Germans went after gold they could seize in the countries they invaded, the Soviets stole the Spanish gold, the U.S. became the repository for all of free-Europe's gold and held onto it later as a war materials supplier to then become the primary superpower for decades, and England struggled to be the banker for Scandinavia and European power for its own financial strength. In short, you need money to fight a protracted conflict, even more so than people, believe it or not.
The Rise of Cryptocurrency in Ukraine
Ukraine was already at the forefront of cryptocurrency adoption in Eastern Europe before the Russian invasion. The country has demonstrated a progressive stance towards blockchain technology, acknowledging its potential to revolutionize various sectors, including finance, governance, and defense. The Ukrainian government had also implemented a regulatory framework that facilitates the development and growth of the crypto industry while ensuring consumer protection and combating money laundering.
Crypto Fundraising for Defense
Recognizing the traditional financial limitations faced by the defense sector, Ukraine leveraged the transformative power of cryptocurrencies to address the funding gap, especially early on in its war. By embracing blockchain technology and establishing crypto fundraising initiatives, the government tapped into a new source of capital for defense purposes that worked very fast, produced sizable liquidity and was accepted globally. It was, in essence, the new "gold." Even better, it wasn't physical, which meant the assets were not at risk of seizure by Russian forces.
One of the significant crypto-powered defense projects in Ukraine was the "Defense Fund." Launched in 2018, the Defense Fund aimed to collect donations in cryptocurrencies from individuals and organizations around the world who supported Ukraine's defense efforts. The fund utilizes smart contracts and blockchain technology to ensure transparency and accountability in the collection and distribution of funds. It pulled in revenue from a variety of streams, including DeFi and NFT markets as well.
Since its inception, the Defense Fund has witnessed overwhelming support from the global crypto community trying to do their part from a distance. Individuals, cryptocurrency exchanges, and even other nations have contributed to the Fund, recognizing the significance of Ukraine's defense and its fight for sovereignty. The amount of money raised through crypto donations has been truly remarkable.
As of the most recent available data, which extends up until September 2021, the Defense Fund has successfully raised over $100 million equivalent in cryptocurrencies. These funds have in turn been utilized to enhance Ukraine's military capabilities, modernize equipment, support wounded soldiers, and provide aid to the families of fallen soldiers.
Impact on Ukraine's Defense
The infusion of crypto funds into Ukraine's defense sector has yielded tangible results as well. The financial injection has enabled the government to undertake critical defense initiatives that would have been otherwise challenging to implement due to traditional budgetary constraints. Furthermore, the crypto-powered defense fundraising has served as a rallying cry for international solidarity with Ukraine's cause. While not everyone is willing to pack up and travel to Eastern Europe to fire a rifle, they have been more than willing to make an electronic donation on a scale far outsizing any conventional fundraiser. The digital response has also brought attention to the country's struggle for independence and garnered support from cryptocurrency enthusiasts and individuals sympathetic to Ukraine's geopolitical situation.
Of course, the democratic aspect of crypto is that anyone can use it, and the Russians haven't exempted themselves from the same financial benefits. While not near as successful as the Ukrainians, Moscow has also leveraged blockchain to fund it's military efforts as well, at least to the tune of $4 to 5 million.
As Ukraine continues to harness the power of cryptocurrencies, it paves the way for other nations to explore similar avenues and leverage blockchain technology for national defense in the future. The paradigm will probably be studied for years as one of the novel impacts that didn't really exist prior to the Ukraine conflict but had a fundamental influence on the turn of events strategically.
