War crowdfunding is weapon that cuts two ways

Reuters
Reuters

WASHINGTON (Reuters Breakingviews) – Crowdfunding has been supercharged as a weapon of war. Ukraine has raised more than $100 million through cryptocurrencies https://www.elliptic.co/blog/live-updates-millions-in-crypto-crowdfunded-for-the-ukrainian-military and a central bank link, putting a new spin on an old trend of outside funding for conflicts. The catch is both sides can take advantage of technology that makes it easier and faster to support a fight.

There’s nothing new about foreigners and diaspora populations contributing amid clashes. Polish immigrants volunteered to fight and donated money in the Russo-Polish conflict after World War One; Americans did the same in the Spanish Civil War of the 1930s. Technology has made it more convenient. Cryptocurrency transfers take seconds where international bank payments take days. Apps like Apple Pay and PayPal-owned Venmo have also made it easier to send funds.

Ukraine has embraced those innovations with some success. A few days after Russian invaded the country last month, Ukraine’s minister for digital transformation, Mykhailo Fedorov, tweeted crypto wallet addresses to which people could donate. About $64 million has poured into various accounts as of Friday, according to crypto data firm Elliptic. A website run by the National Bank of Ukraine https://bank.gov.ua/en/news/all/na-pidtrimku-armiyi-ta-gumanitarnu-dopomogu-zibrano-ponad-118-mlrd-grn, which accepts Google Pay among other payment methods, you have received around $40 million for the army and humanitarian needs.

Digital donations could benefit both sides, though. True, it will be harder for Russia to raise global funds given the raft of Western sanctions imposed on it. But there’s nothing stopping Moscow from trying. Vladimir Putin’s regime may have luck in countries that have been more aligned with it like China and India. While the US authorities have warned companies that sanctions cover cryptocurrencies too, that doesn’t fully cover transactions in fiat currencies like the Chinese yuan.

In 2003, the Eritrean government raised $25 million to support armed groups fighting against the Ethiopian government, a conflict that led to global sanctions against Eritrea, according to late economics professor Tekie Fessehatzion. Twenty years later, Ukraine has used technological advances to make crowdfunding more effective. Digital finance is changing the nature of warfare, but it could cut both ways.

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CONTEXT NEWS

– About $40 million has been raised to support the Ukrainian Army and humanitarian needs, the National Bank of Ukraine said on March 14. Anyone can donate to those causes through the central bank web site using Google Pay, credit cards or other methods.

– Separately, the Ukrainian government and a group supporting its military have raised $64 million through crypto asset donations since the start of the Russian invasion on Feb. 24, crypto data firm Elliptic said on March 11.

(Editing by John Foley and Sharon Lam)

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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