Crypto has become a two-edged sword: Crypto is used to send donations to Ukraine but now emerging as a way to bypass sanctions against Russia

In the past five days, the Ukrainian government and NGOs have raised over $20.9 million through more than 23,000 crypto asset donations since the start of the Russian invasion. During the same period, the price of bitcoin also jumped from about $38,000 to about $44,000 as the invasion drives the demand for cryptocurrencies in both countries.

As millions of dollars in crypto donations flow into Ukraine, cryptocurrency is also slowly emerging as a way to bypass recent sanctions against Russia’s financial sector, making cryptocurrency a two-edged sword.

According to a report from Reuters, trading volumes between the Russian rouble and the Tether cryptocurrency spiked on Monday as the local currency tumbled to a record low on Western sanctions. Tether is a stablecoin used by crypto users to buy cryptocurrencies like bitcoin and Ethereum. Now, the US and its allies are now investigating how to stop Russia’s access to cryptocurrency. But it’s not going to be easy.

Over the weekend, Ukraine’s vice prime minister called on major cryptocurrency exchanges yesterday to block all Russian user accounts. In response to the request, Binance, the world’s biggest crypto exchange, said that it will only block the accounts of Russian individuals who have been sanctioned, but will not “unilaterally” freeze the accounts of all Russian users. Founder of crypto exchange Kraken Jesse Powell also said in a tweet that his company won’t freeze crypto accounts.

Now, The European Commission is looking into whether crypto assets are being used to get round financial sanctions imposed on Russian banks following the country’s invasion of Ukraine, Reuters reported, citing a senior European Union official said on Wednesday.

A senior EU official said the EU is aware that crypto assets were a “possible circumvention route” to avoid sanctions imposed by the bloc and other western powers. The EU’s executive European Commission has been reading reports in the press on crypto assets and has also received information directly, the official said.

“The increase in value of some of these assets may be a response to attempts to circumvent the sanctions. We are looking into this, but no decision has been taken,” the EU official said.