At the beginning of the Russian invasion, the use of cryptographic donations by Ukraine to finance its war effort drew massive attention from the global cryptographic industry.
At the same time, the conflict has displaced the entire local cryptographic industry. Some companies left, while others moved to Ukraine.
Now, many are returning to work, with different successes. And the nation, which recently passed a law aimed at cultivating the local crypto industry, hopes that cryptographic entrepreneurs will help it recover once peace is restored.
“Nothing can happen until the war is over,” said Mikhail Chobanian, CEO of the Ukrainian Kuna Stock Exchange.
The native ecosystem of Ukraine of cryptographic companies is already remarkably well developed. In addition to exchanges such as Kuna, major local cryptographic projects include the NFT URL provider Unstoppable Domains, the Allbridge cross-platform, the Everstake decentralized betting service, and the Near protocol.
Chobanian fled Kiev at the beginning of the war. Using the exchange, he assembled the portfolio that the Ukrainian government has assumed for its fundraising. His account of doing so while he was a refugee captivated the Senate Banking Commission since it weighed the role of cryptography in sanction evasion in March.
Chobanian has since left Ukraine, he told The Block. In fact, the firm had already begun evacuating much of its staff back in January. The cryptographic industry lends itself to mobility, which means that much of that ecosystem, like KUNA, has moved, both internationally and abroad.
Alexander Momot, a Kyivian, is the founder of Remme, a public key protocol, and Peanut, a decentralized exchange service. Momot told The Block that in the month before the invasion, many of the firm’s executives marched on the United States and the United Kingdom, while moving the rest of the team to Lviv, in western Ukraine.
“Currently we are not suffering from the economic situation because cryptocurrencies, even for Ukrainian teams, are not affected by sanctions and Russia’s share of the global economy is so small, including the cryptocurrency economy. So so far we can’t see any impact on our activities, “Momot said. “We have a special policy to prevent any drop in wages.”
Those companies are part of a mass migration. The UN estimates that more than 6 million people have left Ukraine since the end of February. The World Bank recently calculated that the Russian invasion would reduce Ukraine’s economy by 45% over 2022.
Although the country’s economy has long suffered from stagnation as well as long-term population decline, its workforce is highly trained. It produces many of the best programmers and technology workers, locally called “ITshniki”, in the world.
Exports of IT services from Ukraine grew up by 20% in 2020 and by 36% in 2021, making it one of the most dynamic areas of the economy.
Meanwhile, the nation’s Ministry of Digital Transformation has externally supported the local cryptographic industry and has he expressed great hopes that it will be able to lead the economic recovery of the country, especially if the time of peace arrives sooner rather than later.
“The Ukrainian government’s commitment to cryptography is very strong,” Alexander Bornyakov, deputy minister of digital transformation, told The Block. “Of course, we understand the potential of crypto, because this is the industry that has shown growth five times in the last two years, and there is no other industry that is growing so fast.”
However, even before the invasion, many Ukrainians in cryptography chose to leave the country to settle. These include the leaders of cryptocurrency lender Celsius, mining operator Bitfury and Estonia-based WhiteBIT, which presents itself as the largest cryptocurrency exchange in Europe.
Andrey Shevchenko, co-founder and CEO of decentralized exchange programmer Zircon Finance, is a Ukrainian living abroad. Born and raised in Donetsk, which became a war zone in 2014, Shevchenko’s family moved to Italy in 2005, when the country was deeply impoverished.
“I was definitely impressed by how vibrant Kiev has become,” Shevchenko recently wrote to The Block, describing the country before the war. “It has an energy that nowhere in Italy has. At the same time it still has a lot of issues in terms of infrastructure, bureaucracy and mentality that were part of the reason we left. There are things you can’t buy for a lot of money you have personally: straight roads , for example.
Just as the mobility of cryptography has allowed many to flee Ukraine, it also means that the cryptographic industry can be re-established very quickly. For Ukraine, this is part of the ambition behind the cryptographic law signed by President Zelensky in March: to attract talent as soon as possible after the end of the war.
And it seems possible.
“Restoring the rule of law and combining it with an open regulatory sandbox could do wonders for attracting cryptographic companies, especially those from Russia,” Shevchenko said. “The combination of these things would definitely make us consider moving there at least in part, if not for the country’s gross IT talent.”
Ultimately, however, it all depends on peace, which remains elusive.
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