The war in Ukraine is terrible. Every day my condolences go to the victims. War is changing the world faster than ever, in so many areas at once. It is incomprehensible, much less predictable. In this column, I will walk you through what this means for cryptocurrencies.
The first thing you usually think of when you think of a cryptocurrency crisis is the price of Bitcoin, for example. This went down hard in early 2020 due to the pandemic. I expected the price of bitcoin to crash as well due to the war, but little happened. On February 27, the EU significantly increased sanctions against Russia. A large number of Russian banks were kicked out of the SWIFT system. The price of bitcoin rose sharply due to the idea that the Russians were buying Bitcoin to escape the collapse of the ruble. Since the war, the price of Bitcoin has become more volatile, but is moving sideways around $40,000. No major crashes or drops yet. The market volume remains low.
Now that the harsh sanctions are in place, many fear that Russia could circumvent them with cryptocurrencies. Fortunately, that is not the case, because there are a number of valid reasons for this. First of all, the crypto market is still too small to dodge billions in penalties. Second, Russia is not completely isolated from the financial world. There are other alternatives, for example the Chinese CIPS system. After all, Putin has been working for years to make Russia sanctions-resistant. Crypto is not part of it.
In my previous column “Is This New Internet the Key to Mass Crypto Adoption?” was my conclusion: “It is precisely because of the combination of central regulation and the potential of decentralized Web 3.0 that I think mass adoption is underway.” And 2022 will certainly be an exciting year, sadly because of that sad war. Due to fear of circumventing sanctions, regulation has suddenly accelerated. ECB President Christine Lagarde is poised to quickly and vigorously regulate the crypto industry. “The Crypto Asset Markets Regulation Package (MiCA) should be promoted as soon as possible for a European regulatory framework,” Lagarde said. The European Parliament will vote MiCa on March 14. One tricky issue was the ban on Proof of Work. This passage was quickly deleted. Perhaps under time pressure? Bitcoiners are relieved.
On March 9, US Treasury Secretary Janet Yellen released a statement endorsing President Joe Biden’s recent executive order. A full path to this regulation is mapped out: from stablecoin regulation to securities laws and taxes. Janet Yellen was pretty skeptical about crypto, but now she looks like she’s tackling it too. The market is reacting very positively to this news. There is now clarity on the legal frameworks for cryptocurrencies in the US.
Due to the combination of rapidly rising inflation, 0% interest, and the possibility of a recession, you get stagflation. Central banks cannot cut interest rates any further to stimulate the economy. The monetary system is going to creak and creak, our money is falling apart. This opens up opportunities for Bitcoin, a completely new monetary system. Bitcoin can increasingly prove itself as an alternative. I’m very curious how this plays out.
On March 8 I wrote a contribution on LinkedIn. “Donate cryptocurrencies to Ukraine! Did you get a good return on crypto, or may you just miss out on some crypto? Then donate crypto directly to the Ukrainian government.”
Support the people of Ukraine. We now accept donations in cryptocurrencies. Bitcoin, Ethereum and USDT.
BTC – 357a3So9CbsNfBBgFYACGvxxS6tMaDoa1P
ETH and USDT (ERC-20) – 0x165CD37b4C644C2921454429E7F9358d18A45e14
— Ukraine / Україна (@Ukraine) February 26, 2022
In recent weeks, Ukraine has received more than $100 million in donations in Bitcoin and other cryptocurrencies. “Part of this money has already been used,” says the Ministry of Digital Transformation. “Among other things, fuel, food and bulletproof vests were purchased with the donated cryptocurrencies.” Another great donation example: the Kraken exchange will donate $1,000 worth of Bitcoin to every Ukrainian user of the platform. In total it will be an amount of about 10 million dollars.
Crypto in a time of war, now what?
The terrible war is having a huge impact on the crypto market. For now, the course is holding and difficult issues, such as regulation, are accelerating. Fortunately, the penalties are not circumvented with crypto. The crypto community is deeply involved and donates generously. I see that this war offers opportunities for the development of cryptocurrencies. A bright spot in all the suffering and misery.