Could Bitcoin become a weapon of war? First, Russia-Ukraine, and now the Palestinians in the Gaza Strip are interested in Bitcoin and other cryptocurrencies. While the answers are clear, there are still some practical problems with using cryptocurrency before and after war.
How does war, whether at the state or national level, affect cryptocurrencies?
Geopolitical tensions are at an all-time high, and the threat of a potential world war continues to rage, fueled by the recent failed conflicts between Russia and Ukraine. These examples demonstrate that cryptocurrencies such as Bitcoin play an important role in the fight for survival.
Struggle in Russia and Ukraine
Russia’s invasion of Ukraine stirred the world as the war continued. These digital assets have been making headlines since the invasion. Here’s how cryptocurrencies fared during the worst attack since World War II.
Bitcoin fell after Russia launched its initial attack on Ukraine as investors dumped riskier assets.
As Russian soldiers marched through Ukraine, cryptos generally felt a sense of unity. This is evident in the chart above given the trend.
One of the main reasons for the rise of digital assets was crypto donations, because the way comes without border restrictions. Ukraine has been able to raise millions of dollars through these funding initiatives alone Reuters.
Crypto helping hands
Data provided by Elliptic, a blockchain analytics firm, showed around $19.80 million worth of crypto donations in the first quarter. When the Ukrainian government officially demanded Bitcoin (BTC), Ethereum (ETH) and Tether (USDT), donations started pouring in.
An unprecedented call for donations using digital tokens is something very new. These donations were made directly to Ukraine and to pro-Ukraine group organizations such as the hacktivist collective Anonymous. Funds came from individuals, organizations and cryptocurrency institutions. Even the now bankrupt FTX stock exchange took part.
This demonstrates the wartime potential of cryptocurrency. Crypto donations otherwise made to other charities have now ended up directly in wallets where needed.
Crypto has the potential to flourish as a post-war currency. But has this been the case for every war going on today? One such example is the ongoing conflict between Israel and Palestine.
A Brief History
Over the past few years, violent confrontations between Israelis and Palestinians have escalated into full-scale war. This is a generational conflict.
Jerusalem is one of the holiest lands for Christians, Jews and Muslims. Israel declares the entire city as its capital, but Palestine declares East Jerusalem as the capital of its future state. Over the past 50 years, Israel has built settlements in Jerusalem.
More than 600,000 Jews now live there, but Palestinians say it is illegal under international law. There have been numerous peace attempts over the decades since 1979, but tensions remain high in East Jerusalem, Gaza and the West Bank.
Bitcoin: A Weapon of War
Many individuals, most of them Palestinians, have been severely affected by the conflict, especially Palestinians in the besieged enclave of Gaza. The disruption of daily life also affects the financial network.
Enter Bitcoin
The National News He surveyed some individuals across the Gaza Strip and highlighted their interest in cryptocurrencies. “With Israel restricting trade and access, increasing numbers of residents are turning to cryptocurrencies despite the risks.”
Nour, a resident of Gaza, had nothing to do with Bitcoin before his makeup boutique was destroyed in 2021 during the war with Israel. He then started investing in cryptocurrencies to survive.
“My fortune changed when I learned how to invest in Bitcoin and started selling makeup online,” she said.
Dr. Tariq Dana, a policy advisor for the Palestinian Political Network Al-Shabaqa, believes that an increasing number of locals have started using cryptocurrency as a way to gain independence from Israeli financial regulations.
“I believe that the decentralized banking status of cryptocurrency is quite encouraging for us [Palestinians] generating income through a secure and free platform,” said Kareem, a resident of Gaza who also invests in Bitcoin.
In addition, the survey included the views of Palestinian businessman and cryptocurrency investor Haitham Zuhair. Speaking on the issue, he said: “I am sure that the drop in the price of Bitcoin has cost many traders in Gaza so much that their initial investment and capital is not as high as they thought.
“Education and experience are essential to continue with cryptocurrency as an online income space and symbolic tool of economic stability in Palestine. It only takes one wrong call to lose a world’s worth of profits in cryptocurrency.”
Despite these encouraging views and data sets, concerns are always present.
Problems in the right corner
Mohammed Khalid, a business journalist in Gaza City, warns that while cryptocurrencies have opened the door for many Palestinians to profit from global trade, it is not a viable option for the Palestinian Authority.
“It is impossible to do state-level procedures with Bitcoin… The cryptocurrency system in Palestine is centralized, which means that Israel can stop deposits and withdrawals,” he added.
These concerns may be real. Israeli authorities have seized $7.70 million worth of Bitcoin (BTC) and Dogecoin (DOGE) believed to be used by Gaza-backing Hamas.
Practical Scenario
Fiat money has always been minted in times of war. ATMs are shutting down and governments are banning banks from easily withdrawing money, selling international currency or accepting various types of payments, leaving individuals cashless and unable to transact.
In extreme circumstances such as an invasion, local banks holding currency will be unavailable. Cash surrogates, such as food or fuel cards, are likely to be used to buy essentials. Expected results, increased uncertainty and high inflation risks, similar to what happened with Ukraine, turn something as simple as bread into a luxury commodity.
Crypto can potentially be seen as a solution to these problems. Without the involvement of a third party, peer-to-peer payments can be seen as a standalone, unsupervised solution. It cannot be regulated or stopped by any military organization or state government. A stable and secure decentralized payment method can theoretically withstand any political regime.
As a result, cryptocurrencies and other digital assets have already begun to show promising signs in the conflict between Ukraine and Russia, with millions of dollars in anonymous donations harnessing the limitless power of blockchains. Thus, it is reasonable to imagine that they would play a significant role if the conflict were the start of World War 3.
Cryptocurrency has the potential to be the global currency of the post-apocalyptic era, but that would also attract the attention of hackers. Thus, even in the post-war era, cyber security will be a top priority.