Cryptocurrencies take center stage in the war between Ukraine and Russia

With the war between Ukraine and Russia and the economic consequences resulting from the conflict, digital currencies have been gaining prominence and have become alternatives to circumvent international controls and sanctions. In recent days, as the war continued, bitcoin skyrocketed, trading above U$44,000 (R$221,000) on Tuesday (1st), when it reached its highest level in a year, according to international quotes. Since then, financial transactions involving cryptocurrencies have reached unprecedented levels, according to experts heard by CNN.

Since the Ukrainian government asked for money donations through a social network to help the country, US$ 54.7 million in cryptocurrencies (R$ 275 million) were received in a week, according to a survey released by the British company Elliptic, world’s leading expert in digital currency analysis.

In place of the traditional markets for gold, commodities and stocks, cryptocurrencies are emerging as the most sought after assets. The interest in digital money has attracted so much attention in the last ten days that the international press has defined the moment as a “bitcoin boom” and as “the world’s first cryptocurrency war”, according to the Washington Post. Bloomberg has been referring to cryptocurrencies as “digital gold”.

Experts heard by CNN agree that negotiations involving digital currencies have reached in recent days a scenario never seen in history, however, if on the one hand investing in cryptocurrencies appears as a refuge, it is important to understand that it is still a risky exit because they are not transactions regulated and controlled.

“It is a moment never seen in history. The light came on in such a way, with volumes traded well above average, that it already draws attention. The world is watching cryptocurrencies. The future of the currency is digital, not necessarily crypto, but it is certain that borders between countries tend to fall”, evaluated the coordinator of the MBA in Financial Management at Fundação Getúlio Vargas (FGV), Ricardo Teixeira.

For Samir Kerbage, Head of Products and CTO of Hashdex, a crypto asset manager, more than regulation or alternative exit, digital currencies are bringing a great global debate in the war between Ukraine and Russia: changes in consumer mindset and behavior compared to traditional financial systems.

“Cryptos are bearer assets. They were created to return sovereignty to the people. They offer many opportunities and challenges. Before, people bought gold, shares and saved money for moments of crisis, now you can store it inside a flash drive and easily take it anywhere in the world”, he summarized.

However, economist Ricardo Teixeira warns of the need to create some control as these transactions reach public interests, due to the volume and also to avoid inspections or sanctions, as is the case in Russia.

“If the transaction does not go through the central bank, in principle, it has greater flexibility. And the idea of ​​this market, not created by governments, is not to be regulated, in order to have a flow of money. But insofar as it reaches public interests to move resources that cannot be moved, it is a risk as it is a highly speculative market. What can happen is that some form of control is created to trace the origin of the transaction”, he added.

This need to regulate cryptocurrency transactions was suggested by Federal Reserve Chairman Jerome Powell during the Congressional Financial Services Committee meeting last Wednesday (3).

Powell said recent developments in Ukraine call for action on digital finance, including cryptocurrencies. “These are economic activities very similar to bank deposits and money funds, and they should be regulated at comparable levels,” he said.

Regarding the criticism of the lack of regulation, Kerbage thinks that it is a matter of time, understanding and adequacy of governments and world financial systems.

“Since the 70’s with the creation of the swift code, we have seen a dominance of the dollar and the swift itself as control platforms. This pressure on the banking system is a weapon of war against one of the biggest economies in the world, which is Russia. From this point of view, cryptocurrencies have a role in the pursuit of sovereignty,” Kerbage said.

The swift code (Society for Worldwide Interbank Financial Telecommunication) is a universal bank identification code for international financial transactions. It recognizes what and where institutions around the world are.

Last Wednesday (2) the bloc of Western countries formed by the United States, the United Kingdom and the European Union decided to exclude the seven main Russian banks from the Swift Code system. The pressure measure blocks financial transactions and the fulfillment of commercial agreements. The purpose of the sanction is to suffocate the local economy “to the point that pressure from the population, without access to resources, turns against the government”, explained Teixeira.