Involved in the Russian-Ukrainian War: The Role and Influence of Encrypted Assets

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Encrypted assets are inevitably involved in the Russian-Ukrainian war. Russia and Ukraine, Europe and the United States and the encryption market itself form a triangle game, which is not only a tangible financial war, but also an intangible concept war. This kind of game and debate may bring something different to the subsequent world financial and economic system; For the encryption market itself, it may be a turning point or even a starting point. Just like the new generation of mammals, it began to walk out of its own evolutionary path and completely changed the face of the entire biosphere.

With the world becoming more and more flat and "global village", the whole world has become an animal, rain and dust on the "spider web", just as the materialist development view says: the whole world is a universally connected organic whole. The butterfly flapped its wings, and the hurricane started, which in turn affected the butterfly itself.

"The first encryption war in the world", what role will encryption assets play?

Before the war between Russia and Ukraine, encrypted assets have become a tool for Russia and Ukraine to play chess. For example, Ukraine announced the legalization of encrypted assets, while Russia restricted encrypted assets to prevent the outflow of assets. After the official start of the war, encrypted assets began to be deeply involved. Whether as a new war crowdfunding tool, a means of sanctions and anti-sanctions, or as a safe-haven option, encrypted assets and participants in the encrypted market have been actively or passively involved in this war. Washington post even described the Russian-Ukrainian war as "the first encrypted war in the world".

On the third day of the war between Russia and Ukraine, that is, February 26th, the Ukrainian government announced through official Twitter that it would accept donations of encrypted assets including BTC, ETH, USDT, etc. Up to now, it has raised more than $35 million in encrypted assets.

In addition, many project parties and practitioners in the encryption market have also begun to provide support to Ukraine. For example, Vitalik Buterin, the founder of Ethereum, called on social media to provide support to Ukrainian locals through UkraineDAO; Sun Yuchen, the founder of the wave field, announced that he would donate $200,000 to Ukraine.

It can be said that encrypted assets have in fact become a powerful emerging tool for war crowdfunding because of its natural global nature. This attribute of encrypted assets in this war will be gradually developed in depth, and if there is another war in the future, encrypted assets will only be more deeply involved.

As for whether this "crowdfunding tool" will become the "executioner" of killing people or the sword of safeguarding justice, it depends on how people use it. "It is never the gun that kills people, but the person who pulls the trigger."

Another role played by encrypted assets is that they are used by all parties as a means of sanctions and anti-sanctions. For example, the US sanctions against Russia have spread to the field of encryption: the US Treasury Department issued a new regulation on March 1, prohibiting Americans from providing any support to Russian oligarchs and entities, including trading through the use of encrypted assets; At the same time, it is forbidden for Russian citizens and entities to use the encrypted asset trading platform to realize any trading behavior, which can hit Russia's already lame real economy and relatively fragile financial system to achieve the purpose of sanctions.

The Ukrainian side is more radical, and its officials send letters to some trading platforms, asking them to stop providing services to Russian users on the grounds of "worrying that encrypted assets will be used to evade sanctions". At the same time, European Central Bank President Lagarde called on lawmakers to approve the regulatory framework for encryption technology, and pointed out that this would prevent Russia from bypassing economic sanctions.

So can Russia evade sanctions by encrypting assets? Realistically speaking, it is more difficult. Although encrypted assets such as Bitcoin can really help funds to bypass the banking system and transfer around the world more easily, it is not realistic to use encrypted assets to transfer funds across borders on a large scale. Moreover, each transaction record is stored in the blockchain, which can be read by anyone and cannot be tampered with, which makes it easier to be tracked, so that corresponding measures can be taken to identify transactions from "sanctioned entities".

Of course, the road has not been completely blocked, and Russia still has the opportunity to use a variety of tools related to encrypted assets to evade sanctions, but the key is to find a way to trade without using dollars. In addition, the transparency of encrypted assets is based on blockchain, and Russia can develop new tools to help hide transaction records, thus avoiding sanctions to some extent.

Being regarded as a safe-haven choice is the third role of encrypted assets in this war, but this choice is more for citizens of Russia and Ukraine, because the encryption market is relatively small now, which is not enough to act as a large-scale trading medium between officials or organizations, but it is more reliable as a safe-haven choice for some people.

In fact, according to data from Kaiko, an encrypted data company, since the war between Russia and Ukraine, the transaction volume of bitcoin using rubles has soared to the highest level since May last year, while the transaction volume using Ukrainian Grivner currency has climbed to the highest level since October last year. According to a report by the Russian government, it is estimated that there are more than 12 million encrypted asset wallets opened by Russian citizens, involving a total amount of funds of about 2 trillion rubles.

On the same day that the US Treasury Department issued new sanctions, the price of Bitcoin rose in the short term, from around $41,800 to around $44,000, with an increase of over 14% in 24 hours. This may be the result of Russian citizens buying in large quantities for a short time under the guidance of risk aversion.

The Russian-Ukrainian War is the biggest European military conflict since World War II, and the encrypted assets represented by Bitcoin are also wrapped in it. Both sides have discovered the advantages of borderless and unlicensed encrypted assets. Just as the development of the Internet has become an important part of the war, the war between Russia and Ukraine may be "the first encrypted asset war in the world", but it is definitely not the last one.

What is the "encryption spirit" in the battle of encryption market ideas?

When the whole encryption industry was involved in the Russian-Ukrainian war, both the participants in the industry and the encryption assets themselves showed their attitudes actively or passively. Between supervision and being supervised, sanctions and anti-sanctions, support and opposition, the battle of the concept of encryption market was also put on the table. It can be said that under the conflict between Russia and Ukraine, can the decision-making of encryption projects and encryption assets be truly decentralized in the future? These arguments may have a very important impact on the future development of the encryption industry, even the basic appearance and trend of the industry.

Realistically speaking, at present, the encryption industry is generally a pro-Western ideology, so the entire encryption industry almost supports Ukraine one-sidedly. Many encryption projects and individuals have expressed their attitudes and donated encryption assets to Ukraine, just as V Shen, the founder of Ethereum, said: Ethereum is neutral, but he is not.

After the United States issued a policy and asked some encryption companies to comply with their requirements to ban the trading of Russian addresses, most companies chose to comply: if the sanctions are extended to individual citizens, they will abide by the sanctions.

This has caused great controversy in the encryption community: if encryption companies are forced to "politically" stand in line and freeze users' accounts, is there any so-called privacy in encrypted transactions? What is the significance of "decentralization" of encrypted assets?

On the other hand, Ukraine and other countries have also called on encryption companies to choose side stations and call on them to freeze the accounts of Russian users in order to prevent Russia from using encrypted assets to evade sanctions. DMarket, a local game NFT trading platform in Ukraine, also announced the freezing of the accounts of Russian and Belarusian users, which means that the assets of these account owners cannot be raised. After this decision was announced, DMarket was in controversy, and many people even thought it was "theft", accusing it of violating the spirit of decentralization and hurting innocent users.

Of course, many encryption companies have stated that they will not impose sanctions on ordinary users. However, with the continuation of the Russian-Ukrainian war, the encryption industry will be more and more involved, and the pressure from all sides will be greater and greater. At that time, the encryption enterprises that advocate "decentralization" will really face the test of values. It can be said that when the encryption industry wants to enjoy the protection brought by supervision, it is bound to face such controversy.

At present, many users in the encryption community believe that the purpose of encryption economy is decentralization and openness, not privilege and monopoly. Even under the current special circumstances, encryption entities should follow this principle as much as possible. "All encryption enterprises have the responsibility to defend people's economic freedom, not to become a weapon to oppress innocent people."

Just like the cryptopunk group, the origin of Bitcoin, thinks that it is risky to allow criminals and terrorists to develop and use strong encryption systems, but it is necessary to defend personal privacy.

However, with more and more people and stakeholders joining the encryption industry, the original concept of the encryption industry will be more and more dissolved. We hope that more and more people will join the encryption world. However, when more and more people join in, it will be more difficult to ensure that the original idea will be recognized and implemented. This is an unsolvable paradox.

How will the encryption market go in the future under the butterfly effect?

Encrypted assets are involved in the Russian-Ukrainian war. What impact will it have on the encryption market itself? We can discuss from two aspects: short-term price and long-term development.

Judging from the short-term market, after the full-scale conflict between Russia and Ukraine broke out, the price of encrypted assets represented by Bitcoin was generally seen as declining as the big environment, and plummeted. However, due to the influence of risk aversion, sanctions and anti-sanctions, there was a rapid rebound, and Bitcoin broke through $45,000 at the highest.

According to Glassnode data, the number of bitcoin non-zero addresses has exceeded 40 million in 2022, setting a new record high. Judging from this data, it seems that Bitcoin has once again played the role of "digital gold", just like the turmoil in Turkey and the Cyprus crisis, it will rise against the trend.

However, rigid empiricism will undoubtedly kill people. As we all know, the main reason for this round of bitcoin and encryption market is that the central bank headed by the Federal Reserve has released water because of the epidemic. At present, the Federal Reserve is about to raise interest rates and collect water. The impact of this environment on the rise and fall of the encryption market will be more important than the Black Swan incident in the Russian-Ukrainian war, unless the Russian-Ukrainian war is fully expanded and out of control.

If you want to know more about the impact of the Fed's interest rate hike, you can check the article of Ouyi College: "Fed's interest rate hike (1): Will interest rate hikes end the bull market? 》。

From the perspective of US stocks, historical data show that since the outbreak of geopolitical conflicts, US stocks generally fell in the short term, with an impact range of 10-30 days, and then they all quickly recovered. At present, the conflict between Russia and Ukraine has lasted for eight days. According to the previous laws, in the next three weeks, the conflict may still have a certain impact on US stocks. Then, according to the depth of the impact of US stocks on the encryption market, we need to pay attention to the trend of specific markets in the next three weeks and do a good job in risk control.

From the perspective of long-term development, the Russian-Ukrainian war may rewrite or accelerate the historical process of the encryption industry to a certain extent.

Through the Russian-Ukrainian war, encrypted assets can be said to have really reached the center of the world financial stage and began to have a wide impact on the financial world. Under this influence, Russia and Ukraine, as well as Europe and the United States and other countries are playing various games around encrypted assets.

Russia and Ukraine, one is to evade sanctions, the other is to collect donations, while European and American countries are studying how to avoid making encrypted assets a tool for Russia to evade sanctions. All these actions are seen by the world, so next, more countries and institutions will reflect, even imitate and innovate. The benefits of encrypted assets are obvious. As long as the volume is large enough, can we build another system outside the traditional financial system, or at least it is a very important supplement?

This Russian-Ukrainian war has ushered in a "perfect narrative" for the encrypted assets represented by Bitcoin: traditional financial value transfer facilities are paralyzed, assets are frozen by centralized institutions, and capital control ... This just caters to the original narrative of Bitcoin or blockchain, a decentralized value transfer network without permission.

Especially in the war environment, when the sovereign country itself is threatened, the legal tender relying on sovereign credit is hard to escape, and the super-sovereign hard currency is the lifeline. In the past, it seemed that there was only gold, but now there is an option. The Russian-Ukrainian war has made the encryption assets completely out of the circle, and more and more people and funds will be invested in the future, which will undoubtedly greatly accelerate the overall development of the encryption industry.

Finally, realistically speaking, the role of encrypted assets in the Russian-Ukrainian war is still supporting and secondary, and the traditional financial market still dominates. However, just like the new generation of mammals, in the process of tenacious confrontation with the descendants of dinosaurs, they gradually rose to become the master of the entire earth's biosphere, and then a species that walked upright stood out from the primate group and completely changed the face of the entire biosphere.