It’s been over a week of crisis and uncertainty between Russia and its neighbor, Ukraine. Banks, especially in Ukraine, cannot provide financial services due to the conflict; hence, citizens must seek help to meet their daily financial needs. As a result, the traditional banking institutions cannot carry out their standard functions.
Even the Russian currency (Ruble) has deteriorated rapidly, dipping against the dollar because of the various economic sanctions imposed on the country. And the country’s central bank is unable to help because the sanctions have hindered its ability to use its foreign reserves to mitigate the effects. Although the bank already is trying out some measures, these measures are largely speculative.
Since traditional financial institutions cannot function effectively in the two countries, many residents have turned to Bitcoin for help. Bitcoin is currently bridging the gap created by the war in the two countries and making it possible for residents to carry out offshore financial dealings.
Mike McGlone, a senior commodity strategist with Bloomberg, feels that the current crises might help the digital currency to move up the ladder in attaining its goal of being the world’s digital collateral.
Aids To Ukraine In Bitcoin
In the last eight days, people and organizations have sent aid to the Ukrainian government with Bitcoin. Individuals can also render financial assistance to friends and family in crisis areas with the help of Bitcoin and other cryptocurrencies. The decentralized nature of Bitcoin makes it easy to use in times like this as it serves as a backlink for financial transactions, thereby helping individuals to transact business as sanctions have limited the ability of Russian banks to do so.
Since the last quarter of 2021, the price of Bitcoin has not been stable. The instability of Bitcoin is in response to the US Federal Reserve’s plan to raise interest rates due to inflation in the country. The reaction of Bitcoin to policies from leading Central banks have also enhanced its capability to be a digital legal tender of the world.
Bitcoin Reduces the Impact of Sanction on the Russian Economy
With the hefty nature of the financial sanctions imposed on the Russian economy, one would think that the country would have backed out of the war or made preparations to do so. With the possibility of bypassing sanctions to finance the war through Bitcoin, Cryptocurrency might significantly reduce the impact of sanctions on the Russian economy.
Many believers in digital currency have always believed that Bitcoin should be a valid means of payment. Many critics will have none of this, citing its instability as a reason. However, the Russian-Ukrainian conflict has shown that proponents of the digital currency might be correct due to the dependence of many residents of both countries on bitcoin and other cryptocurrencies.
.Most times, the cryptocurrency has made gains during inflation because venture capitalists usually put their money in it, seeing the currency as a much more durable investment when compared to gold. But with talks ongoing to increase the rates, such an increase will possibly reduce Bitcoin’s attractiveness. A rate increase will also reduce the possibility of using digital currency as a legal tender in the foreseeable future.