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Russia's invasion of Ukraine is being called the world's first crypto war


Some are calling Russia's invasion of Ukraine the world's first crypto war. Here's why. On one hand, Ukrainians have raised tens of millions of dollars in cryptocurrency to assist in the fighting. On the other, Washington is trying to stop Russia from using crypto to bypass Western sanctions.

NPR tech reporter Bobby Allyn takes a deeper look at the role of crypto in this conflict.

BOBBY ALLYN, BYLINE: Crypto has attracted the likes of techno optimists, criminals and oligarchs. The cryptocurrency market is worth $2 trillion. That's nearly four times the value of Facebook. Its appeal? It's exchanged anonymously and outside the reach of the global banking sector. Now it's being used as a tool of modern warfare.

TIMOTHY SPANGLER: When we went from stones to spears to catapults to guns, that new technology gets interwoven into times of conflict.

ALLYN: Timothy Spangler is a lawyer who specializes in digital currencies. He says since tough Western sanctions were imposed on Russia, all eyes have turned to cryptocurrency. That's because it operates on blockchain technology, a shared public database not overseen by banks.

SPANGLER: Blockchain technology gives the Russians the very ability that the Biden administration should be concerned about - the ability to transact directly.

ALLYN: The Biden administration and European officials say they are dialing up surveillance of blockchains to try to catch any activity from people connected to the Kremlin. Ukrainian officials have asked crypto exchanges to freeze all Russian accounts. The companies agreed to enforce a blacklist. But they are refusing to ban all Russian accounts, saying that would undermine the crypto community's libertarian ethos. That doesn't mean it's going to be easy for the Kremlin.

ROSS DELSTON: There's lots of problems here for the Russian government.

ALLYN: That's Ross Delston. He's a crypto expert and former banking regulator. He says crypto is volatile. So parking lots of money in crypto could mean losing money for the Russian government. But an even bigger issue is Kremlin allies will have trouble making purchases unless they convert crypto into standard currency.

DELSTON: So where are you going to buy this stuff? - for example, food imports. What about spare parts for equipment and electronics that are not made in Russia?

ALLYN: Delston says buying those kinds of things will require currencies like the U.S. dollar or the euro - the sort of money that moves across the banking sector, the very place where Western officials are looking to enforce its sanctions.

DELSTON: There'll be an army of people in the U.S. government looking at cryptocurrency transactions, at least the ones on public blockchains.

ALLYN: Meanwhile, government officials in Ukraine have their own plan for crypto - providing funding to the military and its residents. The Ukrainian government has asked for donations in cryptocurrency and has so far raised more than $50 million in crypto.

Alex Gladstein with the Human Rights Foundation has been assisting in the fundraising.

ALEX GLADSTEIN: Humanitarian implications of this are massive.

ALLYN: He says it's the everyday citizens caught in the middle of the war who might actually benefit the most from established cryptocurrencies like bitcoin, since it can be transmitted instantly and without a local bank account or even an ID.

GLADSTEIN: War, however it's waged, hurts the average person more than it hurts the elites. Now we have a technology that benefits everybody equally. And it's inspiring to see that people now have this, like, backup plan.

ALLYN: More and more aid groups are trying to make crypto accessible to Ukrainians. But the world of cryptocurrency is complicated. It requires real tech savvy, navigating a host of apps and online marketplaces - likely not top of mind for people in the midst of war.

Bobby Allyn, NPR News.

(SOUNDBITE OF RATATAT'S "LOUD PIPES") Transcript provided by NPR, Copyright NPR.

Bobby Allyn is a business reporter at NPR based in San Francisco. He covers technology and how Silicon Valley's largest companies are transforming how we live and reshaping society.