Below are guest posts and opinions from Sergii Malomuzh, founder of Rewump.
A war-torn country is one of the most financially marginalized regions in the world. Destructive conflicts affect people's living standards and harm the local economy. Digital assets appear as important fiat currencies in conflict zones, as traditional banks often do not have access.
Nakamoto atoshi designed Bitcoin (BTC) to free people with peer-to-peer (P2P) transactions from centralized surveillance. Bitcoin has influenced other digital currencies, including Stablecoins, which serve as the final hope for those living in war-affected countries.
From regulatory concerns to user literacy, despite the challenges in crypto adoption, asset classes remain essential for struggling countries.
The need for cryptography in fighting countries and support regulations
The banking system can face serious confusion, depending on the nature of the conflict. Most businesses cannot operate in active war zones, so they move to safer areas. Those who stay will charge sudden premiums for their services and hand the cost to civilians.
This shift is poised to affect both standard of living and business viability. As a result, users increasingly rely on Bitcoin, Stubcoin and Altcoin to mitigate the impacts brought about by digital transaction restrictions and cross-border payment constraints.
Cash transfer is essential to the survival of residents in a struggling economy. The speed, low cost and easy accessibility of cryptocurrencies make them a viable alternative to traditional currencies.
These digital assets also allow users to bypass the sanctions imposed by the Western banking system. The main concern is to ensure that quality of life is not compromised and that the company can easily transfer value.
In regions such as Ukraine and Syria, governments are pushing for legalization of cryptocurrencies. Such measures could raise institutional awareness of the new asset class and build public trust.
In 2022, Ukraine passed the “Virtual Assets” Act and officially established Crypto's legal status. The Act classifies virtual assets as property and grants individuals and businesses the legal right to own, use and trade digital assets. Regulatory oversight is at both the National Bank of Ukraine and the National Securities and Stock Markets Committee.
Syria currently has no formal crypto regulations. However, the government is actively drafting the law. These measures aim to rekindle the local economy and attract foreign investment.
Important benefits of cryptography in war-torn regions
The adoption of cryptocurrency in conflict zones defines clear benefits for individuals, businesses and governments.
The main advantage of using digital currency in war-torn countries is its accessibility. These assets will remain functional even in the event of a collapse of traditional banking infrastructure.
Beyond that, Stablecoins account for around 70% of daily crypto transactions, but act as an inflation hedge and maintain a 1:1 peg in the US dollar.
Low barriers to Crypto's entry – only need digital wallets with minimal verification – especially valuable for displaced people in conflict areas who may not have access to traditional banking services. Companies can make cross-border payments without settlement concerns and are based on the robust liquidity of the crypto market.
More than $52 billion in tethers (USDT) are traded today, according to Coinmarketcap. The Stablecoin market has recorded over $66 billion in 24-hour trading. This means that no matter how big the transaction is, there is good reason to believe there is enough funds to resolve it.
At the national level, turning excess energy into bitcoin mining resources is also a major advantage of cryptography during the war. Using untapped energy resources for Bitcoin mining can result in multiple economic benefits, including monetizing excess energy, attracting foreign investment, creating jobs, and generating supplemental government revenues.
The global and decentralized nature of cryptocurrencies has proven effective in fundraising efforts. This helped Ukraine generate up to $225 million in various digital currencies.
Digital currency acts as a hedge against hyperinflation. When profiled over the long term, Bitcoin consistently outperforms Fiat currency and traditional assets in long-term percentage profits. The coin shows intense volatility, but its overall trajectory is actively flowing in the long run.
In Syria, annual inflation averaged 100% over the past four years, with domestic currency depreciating 30 times. In contrast, Bitcoin's inflation rate is only 1.5%, but its value increased by 240% during this period.
These benefits mean that digital currency plays an important role in maintaining both the individual and the country's economy during geopolitical conflicts.
Are there any drawbacks to adopting cryptography?
Like other innovations, using digital currency in a fighting country has its limitations and drawbacks. One of the most obvious is the possibility of careless funding by terrorist organizations.
Western regulators have highlighted this vulnerability in particular, and have become an important focus for knowing Customer (KYC) and Money Laundering Anti-Money Laundering (AML) compliance frameworks.
The lack of centralized surveillance means there are challenges in trading protection and fund recovery in the case of fraud. Furthermore, existing regulatory frameworks often prove to be inadequate, creating many gray areas that businesses may leverage against the average consumer.
At a business level, depressed economic activity could encourage unauthorized crypto mining businesses that burden national energy infrastructure.
Low digital infrastructure and low levels of financial literacy among local people can make recruiting even more difficult. Nevertheless, cryptocurrency and digital asset service providers remain their first contacts in the plagued regions.
Cryptocurrencies offer a more agile solution to financial challenges compared to traditional systems. This responsiveness positions digital assets as a potential driver of economic transformation in the fighting nation and inflatable economies.
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