Ukraine Legalizes Cryptocurrencies Amid Russian Tensions

Ukraine officially legalized cryptocurrencies Thursday, even as Russia has amassed troops and weapons on the country's borders and the tensions have rattled global financial markets.

Although most central banks and governments have been wary of cryptocurrencies for their volatility and their potential to negatively impact economic stability, a handful of countries have opened up to them. El Salvador, for example, has made Bitcoin legal tender.

Mykhailo Fedorov, Ukraine's Vice Prime Minister, confirmed the news in a post from his official Twitter account.

The official government portal reported Thursday the passage of a new law recognizing virtual digital assets like Bitcoin in the country. The bill was reportedly set in motion in 2020. The law does not put Bitcoin on an equal footing with the hryvnia, Ukraine's national currency.

A report in the Elliptic, which is a blockchain researcher, said that amid tensions with Russia, Bitcoin payments from across the world have surged to Ukrainian volunteer and hacker organizations. These funds have been used to crowdfund the country's military. As per the report, volunteer groups in Ukraine collected more than $570,000 worth of cryptocurrency just in 2021.

The concern that Russian troops will invade Ukraine has deepened in recent days and reports have said there are more than 100,000 Russian troops at the Ukrainian border. Moscow has consistently denied plotting to invade Ukraine.

The report suggested digital currencies are gaining importance as a fundraising medium for volunteer organizations because of their anonymous nature. Cryptocurrencies can be transferred and received discreetly, enabling groups to raise funds even if financial institutions like banks do not allow the transfer or place severe controls on the transfers of funds.

Russia recently passed legislation to recognize cryptocurrencies as a type of currency akin to foreign currencies, and not just a digital asset.