The conflict in Ukraine, now in its second year, has received financial backing from the West in response to Russia’s invasion. Moscow, on the other hand, has been using the sales of oil and natural gas to fund its military efforts. While the media often focuses on the supply of heavy artillery and advanced tanks, frontline soldiers on both sides are often lacking essential items such as body armor, food, and medical supplies.
Research by blockchain analytics firm Chainalysis reveals that the Russia-Ukraine war has seen the largest-scale use of cryptocurrencies for any global conflict to date. Volunteer groups have been leveraging social media to crowdfund specific items needed on the battlefield, requesting funds in the form of cryptocurrencies that can be sent quickly and in small amounts from donors worldwide.
This approach limits the effectiveness of Western financial sanctions on the Russian side, as it bypasses traditional banking systems. It also expedites the process of support reaching Ukrainian soldiers, whether from Western donors or their own family and friends.
Though the amounts involved are relatively small compared to larger military expenses, the targeted transfer of funds to soldiers allows them to purchase the specific items they need to save lives. Monitoring the flow of cryptocurrencies has become possible through the transparency of blockchain transactions. Blockchain analytics firms like Chainalysis and Elliptic have been able to track donations to various groups involved in the conflict, practically in real time.
The use of social media platforms like Telegram and VKontakte has made it easier to solicit donations and monitor the influx of funds to specific groups. By connecting social media usage with blockchain transactions, researchers have gained insight into how these funds are used. The purchases often include items like night vision devices, drones, body armor, and boots that significantly impact the safety and operational capabilities of soldiers on the frontline.
Despite ongoing efforts to limit Russian revenues from oil and gas sales, Moscow continues to allocate billions of dollars to its war effort. In comparison, funding via cryptocurrencies is modest, but pro-Russian militia groups have still received an estimated $20 million in donations for their activities in Ukraine.
Overall, the use of cryptocurrency in the Russia-Ukraine conflict is a sign of how digital assets are increasingly being utilized in armed conflicts around the world. While the impact of cryptocurrencies may be limited compared to other funding sources, it provides a new way for individuals and organizations to support soldiers on the ground and contribute to the outcome of the conflict.
