Blockchain analytics company Elliptic has released a report examining the role of cryptocurrency in the Russia-Ukraine war, saying the report proves that the crypto industry has the ability to weed out criminals and others seeking to misuse cryptocurrency.
Analysis of more than $230 million in blockchain activity has found that pro-Ukrainian crypto fundraising campaigns significantly outpaced those of Russia, according to the report. Ukrainian fundraisers have received more than $212 million in crypto donations, while Russian fundraising campaigns have received approximately $4.8 million. The analysis uncovered the "cybercriminal infrastructure that underpins the blockchain activities" in Russia, as more than 10% of crypto donations sent to Russian fundraisers originated from criminal activity. Less than 2% of pro-Ukrainian crypto donations came from illegal activities.
"As an industry, we have the power and responsibility to shape how digital assets are used, and to prevent them from becoming a haven for money launderers and sanctions evaders," Simone Maini, Elliptic CEO, said in the report. "This report should encourage financial institutions, regulators and law enforcement that through innovation and the inherent attributes of most cryptoassets, this industry can effectively mitigate financial crime and sanctions risks to secure cryptoassets as a force for good – accessible to and beneficial for all."
Effort within the crypto community to "directly donate and utilize its resources to assist Ukraine’s resistance against the war has been swift and unmatched compared to any previous conflicts," the report said. The analysis found that the most popular cryptoassets donated to pro-Ukrainian fundraisers were Ether ($68.1 million), Tether ($64.2 million), Bitcoin ($39.3 million), BNB Coin ($10.3 million), Polkadot ($9.5 million), Near Protocol ($5.3 million) and Binance USD ($4.8 million).
The Ukrainian official Twitter account posted addresses for Bitcoin and Ethereum donations shortly after hostilities with Russia began, according to Elliptic. The Aid for Ukraine initiative, which was started by the country's Ministry of Digital Transformation, has since been able to accept donations on more than a dozen different blockchains.
The report noted that the endeavor was likely one of the largest "adoptions and endorsements of cryptoassets" by an official national government.
“Crypto really helped during the first few days because we were able to cover some immediate needs," Alex Bornyakov, deputy minister for Digital Transformation, said in the report. Elliptic's analysis found that the Ukrainian government spent much of its crypto donations on military equipment and clothing, medical supplies, field rations, cars and other transportation, and communication devices.
By the end of 2022, crypto donations comprised just over 20% of the total funds raised by the three largest pro-Ukrainian fundraising campaigns.
"Though this is the minority, the contribution of crypto is still notable, as the Ukraine-Russia war marks the first conflict where crypto has played such a considerable role," the report said.
The report also noted that hackers and scammers have attempted to take advantage of pro-Ukrainian fundraising campaigns.
"In their most basic form, these scams involve establishing fake Ukraine social media accounts and posting similar messages to the official government account – replacing the Aid for Ukraine crypto address with the scammer’s own," the report said. Elliptic's analysis found that many would-be scammers did not actually receive any funds, "suggesting that the online cryptoasset community has been largely resilient to these scam attempts."
Additionally, the report found that several major crypto exchanges answered the Ukrainian government's call to block or remove from their platforms accounts associated with Kremlin allies. Binance, the largest crypto exchange in the world, and Coinbase have blocked thousands of accounts suspected of being linked to illicit Russian activities.
"With a significant proportion of pro-Russian cryptoasset fundraising activity being attributed to illicit activity, virtual asset services require effective risk management and mitigation strategies to prevent inadvertent exposure to their transactions," the report said.