Ukraine legalises cryptocurrencies amid soaring tensions with Russia

Ukraine legalised cryptocurrencies on Thursday even as its tensions with Russia have roiled global markets in the past week due to global concerns over the prospect of a wider war, with more than 100,000 Russian troops near the Ukrainian frontier. 

"Ukraine is already in top-5 countries on cryptocurrency usage. Today we made one more step forward: Parliament adopted law on virtual assets! This will legalize crypto exchangers and cryptocurrencies, and Ukrainians could protect their assets from possible abuse or fraud," said Ukraine Vice Prime Minister Mykhailo Fedorov on Twitter.

Bitcoin donations have soared to Ukrainian volunteer and hacking groups, some of which have supplied equipment to government forces, according to a report showing such groups received more than $550,000 worth of cryptocurrency in 2021.

The report, published by blockchain researcher Elliptic, suggests digital currencies are growing in importance as a funding method for volunteer groups backing Ukraine's government as fears of an attack by Russian troops massed near its border grow. Moscow denies planning an attack.

Cryptocurrency worth just $6,000 was raised by the groups in 2020, Elliptic said.

Cryptocurrencies can be sent and received anonymously, allowing organisations to raise money even if financial firms do not allow - or impose strict checks on - transfers of funds.

"Cryptocurrency has proved to be a robust and growing alternative (to traditional currency) - especially when it comes to donations from other countries," Elliptic said.

In 2020, Ukraine tightened checks to curb money laundering, demanding ID verification for some domestic cash transfers. Cross-border transfers are also subject to mandatory monitoring, according to the Ukrainian National Bar Association.

Elliptic tracks the movement of cryptocurrency on the blockchain for financial firms and government agencies. It said one group, Kyiv-based Come Back Alive, began raising funds in crypto in 2018 and received crypto worth almost $200,000 in the second half of 2021 alone.