Crypto assets have played a role in financing both sides in the war between Russia and Ukraine, something we started seeing signs of almost immediately upon its start.

Now Ukraine is allocating some of its limited resources and manpower to this digital front, according to the Ukraine Security Service - a law enforcement agency that says they successfully deployed what's vaguely being called a 'mechanism' to 'block wallets of Russian volunteers who raise funds for the Russian army'.

However, this actually went much further than 'blocking' a transaction. It actually appears no  transactions were blocked - but they did block who could access it. Ukraine then proceeded to seize the funds sent to the unnamed 'Russian volunteer' - then tracked him down and arrested him. 

According to the Ukraine Security Service, they did this with 'the assistance of foreign crypto exchanges.' which remain unnamed.

Total value of the crypto was approximately $20,000 USD.

The simplified version....

Crypto exchanges in pro-Ukraine nations are locking out Russian users, and letting Ukrainian authorities in to take their funds.

As always, bold moves tend to come with increased risks, and it's worth pausing to realize we wouldn't want to hear Russia or one of its allies did this to a UK or US citizen under the justification of the account owner supporting Ukraine.

This isn't my opinion, it's been official policy of the US not to do this.

The US and its allies have a long history of 'freezing' funds, not spending them. The amount of money US and UK citizens have held in foreign banks or businesses at any given moment is why "no you can't have it, but we also won't take it for ourselves" is a mutually beneficial policy during conflict.

The financial war...

While the media rarely goes into detail on actions done quietly behind the scenes, both sides have been surprisingly aggressive when it comes to using their authority over financial intuitions and businesses if they believe taking certain actions will result in inflicting economic damage on the other. 

US and NATO Allies have frozen Russia's accounts in their banks, in the US alone there is over $600 million they now cannot access. Russian gold imports are also banned, and Russian flights can no longer enter the US, UK, EU and Canadian airspace. 

While everything mentioned so far is fairly traditional and predictable when it comes to sanctions, the NATO member nations have another layer of sanctions intended to target Putin's wealthy friends and other influential Russians. Over 1000 individuals and their businesses with assets within the reach of governments supporting Ukraine have had them frozen or seized. Not just cash, anything belonging to the people on this list is potentially up for grabs. These sanctions are meant to disrupt the lives of one man instead of an entire country—the goal being to leave Putin surrounded by frustrated people motivated to see the war end.

Russia has hit back...

The most impactful so far was Putin's decision to stop accepting US dollars for their oil. While this may not sound like a big deal at first, it's important to note that all oil from around the world is typically purchased with US dollars. Whether it be from Russia or the Middle East, the USD was considered the standard currency everyone agreed upon.

Then factor in how much oil Russia sells, up to $700 million PER DAY - and you understand how requiring all transactions for Russian oil to use their currency (the Ruble) saved it from collapsing, after losing nearly half its value at the beginning of the war.

Protect Yourself...

While average citizens from the countries involved in the conflict have not been targeted by any governments involved so far, that's something we could potentially see change if the conflict escalates and intensifies.

Remember, the offer of removing sanctions and resuming business with Russia is on the table as a reward for ending the war. That's the entire purpose of imposing sanctions in the first place.

But if Putin continues military operations in Ukraine much longer, ignoring the sanctions, we reach a point where neither country intends to work with the other any time soon. This is when orders to seize anything belonging to people from that rival nation become an option.

My advice: if this were to happen, the announcement would come after it’s done, so now is a good time protect your assets by making sure none are sitting on a Russia-based exchange, or any other investment platform.

The downside of Ukraine openly boasting about seizing crypto belonging to a Russian citizen is that Russia could do the same, and claim they’re simply giving an equal response.

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Author: Ross Davis
Silicon Valley Newsroom
GCP | Breaking Crypto News