Cryptocurrencies (“Crypto”) are meant to exist in a neutral haven: Satoshi Nakamoto expressly designed Bitcoin to allow peer-to-peer interactions outside of existing regulatory and political frameworks. (Satoshi Nakamoto, Bitcoin.org). Though Bitcoin and other Cryptos remain apolitical tools, the intersection of theory with harsh reality has led to Crypto’s increasing politicization. For example, consider the statement of Vitalik Buterin, Ethereum’s co-founder: “Ethereum is neutral, but I am not.” (Lionel Laurent, Bloomberg). Buterin’s statement was made in the context of Russia’s invasion of Ukraine, and illustrates a new, fundamental truth: Crypto cannot remain neutral and apolitical in the future.

Crypto has sparked two views of its role in the ongoing Russia-Ukraine war. One side argues that Crypto provides financial support and stability for Ukraine’s citizens and government (as well as for average Russians). The other side maintains that Crypto is a viable tool for the Russian state and Russian oligarchs to avoid economic sanctions and launder funds. (Emily Stewart and Rebecca Heilweil, Vox).

“Pro-Crypto” proponents repeatedly espouse Crypto’s value as a digital tool for common citizens on both sides of the conflict. As a non-tangible asset, Crypto is more accessible, less dangerous, and less burdensome than physical cash in a combat zone. (Daniel Van Boom, CNET). Crypto is also a more reliable store of value than either nation’s currency as each currency experiences rapid devaluation amid overstressed demand. Id. These benefits go for Ukrainian and Russian citizens—numerous Crypto exchanges are declining universal trading bans on Russians, reasoning that Russian citizens may not support the invasion and may need Crypto due to the ruble’s dramatic devaluation. (Julian Dossett, CNET). Another key point in Crypto’s favor is that it enables efficient, high-volume donations to the Ukrainian people and government. As of March 12, 2022, “[m]ore than $63 million in Crypto assets ha[ve] been donated to the Ukrainian government and an NGO providing support to the military, according to blockchain analytics firm Elliptic.” (Hannah Miller, Bloomberg). Pro-Crypto proponents consistently stress that Crypto offers substantial relief for day-to-day citizens of both nations by providing a more stable and accessible, and less burdensome means of covering expenses than physical cash, all while providing aid where aid is most needed.

Nevertheless, pro-Crypto arguments overlook unique factors enhancing Crypto’s suitability in Ukraine, among other weaknesses regarding Crypto’s value more generally. First, Ukraine is uniquely well-suited to use Crypto as an alternative to traditional finance. (Eamon Barrett, Fortune). As reported by the New York Times, Ukraine was a Crypto pioneer in the years prior to the invasion, and the average Ukrainian citizen has more familiarity with—and therefore, greater ability to use—Crypto funds and donations than citizens from perhaps any other nation. (New York Times). It is unclear whether another, less Crypto-familiar nation would experience the same benefits from Crypto donations, or benefit to the same degree as Ukraine has from Crypto donations. (See Daniel Van Boom, CNET). Second, Crypto generally cannot be used to directly purchase materiel or refugee supplies because Crypto often must be converted into another currency first. (Molly Roberts, Washington Post). Crypto undoubtedly offers more flexibility in currency conversion and is holding a relatively more stable price than either the Ukrainian or Russian currencies, but donations made in traditional currencies seem similarly well-suited for funding and donation purposes.

What, then, of the anti-Crypto crowd? Crypto detractors almost universally point to Crypto’s potential as a Russian tool to evade economic sanctions. The theory is straightforward: Russian entities are considered top-notch cyber experts and “new tools developed in Russia can help mask the origin of [sanction-eluding] transactions.” (Emily Flitter and David Yaffe-Bellany, New York Times). Iran and North Korea mitigated the impact of economic sanctions through similar means in the past: the latter used ransomware to steal Crypto and continue its nuclear program despite sanctions. Id.Alternatively, Russia could use its relationship with China—which has its own Crypto currency and bank—to access other nations’ Crypto markets and work around sanctions even if its cyber-evasion methods fail. Id. Hence, lawmakers in the U.S. and abroad have expressed concerns, as well as a desire to prevent Russia from using Crypto as a sanction-avoiding tool. (Sarah Wynn, CQ Roll Call). 

Evidence suggests Western Crypto enforcement and fund-tracking specialists are capable of tracking and seizing funds illegally acquired or laundered because of blockchain’s decentralized and public nature, somewhat quelling anti-Crypto concerns. Indeed, the U.S. Department of Justice recently seized billions of dollars with the aid of TRM, a “blockchain intelligence company that works with law enforcement to help track illicit payments.” (Sarah Wynn, CQ Roll Call). Former SEC lawyer Ashley Ebersole noted Crypto’s decentralized, apolitical nature makes cryptocurrency transfers and thefts easier to investigate than similar crimes routed through traditional financial institutions. Id. This is because there are fewer privacy laws and institutional policies to delay investigations in the Crypto space than in traditional institutions. Id.Similarly, “Salman Banaei, co-head of policy for the blockchain-tracking firm Chainalysis, said cryptocurrencies help law enforcement because . . . [they] transact on blockchains, digital public ledgers, leaving a record of every transaction . . . ‘[i]t's easier for criminals to get on board and start moving money around, but it's also easier to track them down.’” (Caitlin Reilly, CQ Roll Call).

Even prior to the Russian invasion of Ukraine, the SEC, other agencies, and lawmakers clearly expressed a desire to bring Crypto into traditional regulatory schemes. Current SEC Chair Gary Gensler recently said “[s]tanding astride isn’t a sustainable place to be [for Crypto] . . . [i]f this field is going to continue, or reach any of its potential to be a catalyst for change, we better bring it into public policy frameworks.” (Gary Gensler, Wall Street Lawyer). This regulatory desire will only be heightened by the increasingly politicized actions of Crypto founders and exchanges in the Russia-Ukraine context. These actions show that even a fundamentally apolitical system will, under sufficient pressure, be used by individually biased actors in decidedly political fashion. (Tom Wilson, Reuters). Regardless of whether Crypto’s ultimate role in the Russia-Ukraine conflict is positive, negative, or somewhere in between, one thing seems certain: due to its prominent role in the Russia-Ukraine war, Crypto cannot remain a haven of pure neutrality and apolitical agency.