As tensions along the Russo-Ukrainian border have steadily escalated, with as many as 130,000 Russian troops deployed across from Ukraine’s contested Donbass region, negotiations have proceeded between American, European, and Russian officials attempting to find a solution to the crisis. At the same time, however, the Armed Forces of Ukraine have prepared for war with aid from an unusual source: cryptocurrency donations.

More than $550,000 in Bitcoin was donated to Ukrainian non-governmental organizations (NGOs) associated with the country’s military, according to a report from Elliptic, a blockchain analysis company—representing a 900 percent increase from similar donations in 2020. 

The donations have largely gone towards equipping the Ukrainian army, as well as towards purchases of medical supplies and military drones, according to the report. Some of the funds were also set aside for the development of a facial recognition app that could identify Russian mercenaries or spies.

Although Ukraine’s military does not accept donations, it has long relied on partnerships with Ukrainian volunteer groups funded by private donations. Some of these partnerships have been controversial in the past; the army utilized several neo-Nazi militias, including the notorious Azov Battalion, during its initial struggle to contain the separatist movements in Donbass in 2014.

Over the past seven years, Ukraine’s military has professionalized with U.S. and European aid, and Kyiv no longer relies on private militias. However, it has continued to work with NGOs, including “Come Back Alive,” a private organization that provides military equipment to Ukrainian troops—which received around $200,000 in Bitcoin donations, making it one of the largest recipients, according to the report.

Cryptocurrencies such as Bitcoin are useful for funding military conflicts because of their decentralized and unregulated nature. Although many traditional financial institutions have sharp restrictions on funding wars, and are obliged to follow international sanctions, cryptocurrencies are effectively impossible to regulate in this way. For this reason, Bitcoin is also used in other heavily sanctioned areas, including Iran, which remains a hub of cryptocurrency mining in spite of repeated blackouts and government bans.

For the same collection of reasons, cryptocurrency has also seen use on the other side of the conflict, and the report mentioned similar, although far smaller, cryptocurrency donations to the pro-Russian separatist “republics” of Donetsk and Luhansk in Donbass.

Recognizing the potential of cryptocurrencies, the Ukrainian government has also taken steps toward utilizing them at the national level. Ukrainian president Volodymyr Zelenskyy approved legislation in late 2021 allowing the central bank to issue a digital currency, and the country’s parliament is currently debating a law that would fully legalize and regulate the use of digital tokens within the country.

Trevor Filseth is a current and foreign affairs writer for the National Interest.

Image: Reuters.