Speaker 1: I'm Stacy Marie Ishmael, Managing editor of Crypto for Bloomberg News,
Speaker 1: and this is Bloomberg Crypto at Daily Bloomberg I Heart Podcast.
Speaker 1: It's Friday June. Before the Russian invasion of Ukraine in February,
Speaker 1: the Ukrainian government and the crypto community did not quite
Speaker 1: see eye to eye. There was skepticism, distrust, and even
Speaker 1: a few police raids on unlicensed crypto exchanges. But since
Speaker 1: the war broke out there's been a shift. Digital asset
Speaker 1: leaders in Ukraine are now hailed by some as heroes
Speaker 1: because of their work with the Ukrainian government to finance
Speaker 1: the war effort, and they're scoring some big successes along
Speaker 1: the way. Ukraine's Deputy Minister Phy Digital Transformation has said
Speaker 1: the crypto donations enabled the army to buy military equipment
Speaker 1: and medicine. Today I'm joined by Bloomberg Report Alistamosh to
Speaker 1: talk through his reporting on how Ukraine has been using
Speaker 1: crypto during the war to support its armies and its population. Alistair,
Speaker 1: thank you so much for being our guest today, my Peta,
Speaker 1: thanks for having me. We're going to talk about the
Speaker 1: war in Ukraine from a crypto angle, which for folks
Speaker 1: who haven't been following along closely might seem like a
Speaker 1: little bit of a strange way to tackle this topic.
Speaker 1: So I'd love for you to set the stage about
Speaker 1: what as it relates to Ukraine and crypto has been
Speaker 1: interesting but also been a sometimes controversial place for the industry,
Speaker 1: and how that has changed in light of the war
Speaker 1: with Russia. Well, so, the situation in Ukraine when it
Speaker 1: comes to crypto is in some in many ways not
Speaker 1: just similar to the experiences that you've had in many
Speaker 1: other countries in that the authorities have been suspicious to
Speaker 1: say the least of crypto, but what's been really amazing
Speaker 1: to witness. I mean, obviously this is in some ways
Speaker 1: a smaller story of the broad struggle that Ukraine has
Speaker 1: been through in the credible journey that the Ukrainian people
Speaker 1: have been on these last months. But one one sort
Speaker 1: of small chapter of that is how the attitudes towards
Speaker 1: crypto have changed fundamentally, because a couple of years ago,
Speaker 1: actually Ukrainian authorities viewed crypto with deep skepticism and there
Speaker 1: were frequent raids of crypto exchanges and anyone involved in
Speaker 1: crypto activity from both the Special services and other government bodies.
Speaker 1: It was viewed as you know, sort of the classic
Speaker 1: idea of this is just drug money on this is
Speaker 1: money for illicit purposes and there's no good use for
Speaker 1: this technology or this that type of asset. But actually
Speaker 1: the war experiences totally transformed there. It's been kind of
Speaker 1: miraculous to see that actually the war effort is being
Speaker 1: financed in part by crypto, and Crypto is playing a
Speaker 1: critical role in enabling the government to source military equipment,
Speaker 1: humanitarian aid, all kinds of necessities that it needs. Despite
Speaker 1: the relentless onslaught of Russian forces, Ukraine's vital tech sector
Speaker 1: is still operating for clients around the world, while Ukraine's
Speaker 1: own tech leaders are helping support the war effort and
Speaker 1: working around the clock to keep their own employees safe.
Speaker 1: Right now, so you're holding up your phone. I mean,
Speaker 1: one of the things that really struck me when we
Speaker 1: were doing reporting on the situation with Crypto and Ukraine
Speaker 1: after the Russian invasion was how many developers protocols, you know,
Speaker 1: the kinds of bits of crypto infrastructure that people have
Speaker 1: come to rely on. Our manteein either out of the
Speaker 1: Ukraine or by Ukrainian devs, and you know, given that environment,
Speaker 1: were you more or less surprised that crypto has an
Speaker 1: emerged as this lifeline during the war. You're definitely right
Speaker 1: that there was a very vibrant local crypto scene in
Speaker 1: that there were many developers locally. They are articals based
Speaker 1: people working on various projects in Ukraine. And actually Michael
Speaker 1: Chabani in who's ahead of the Kuna crypto has changed
Speaker 1: that the biggest exchange in Ukrainian I'm sure we'll we'll
Speaker 1: be talking about in a moment. He called the crypto
Speaker 1: scene wild back in the day, and there was both wild,
Speaker 1: one because you had the sort of the government suspicion
Speaker 1: and crackdown of which I've spoken but also because you
Speaker 1: kind of had a real vibrant local scene where you
Speaker 1: had many people working on different projects and there was
Speaker 1: a real buzz about it. He talked about meetups where
Speaker 1: there would be hundreds of people, you know, into the thousands,
Speaker 1: gathering on a weekly basis. That's very different to any
Speaker 1: experience that I've had in London. So there was this
Speaker 1: sort of acceptance of crypto, both in terms of having
Speaker 1: plenty of Ukrainians working in the industry, but also there
Speaker 1: are statistics showing that Ukraine is either the first or
Speaker 1: suddenly in the top three in terms of countries globally
Speaker 1: that use crypto. So those kind of this underlying um
Speaker 1: acceptance among the people. It was just sort of at
Speaker 1: the government that although there was a suspicion, and now
Speaker 1: that's totally transformed. So I guess it's sort of an
Speaker 1: aligning of government and state with the people. And you
Speaker 1: mentioned Michael Servanion, who has really been instrumental in making
Speaker 1: that alignment happen, right, So he he is sort of
Speaker 1: apocryphally known as the father of the crypto scene in Ukraine.
Speaker 1: You interviewed him at the very beginning of the war
Speaker 1: by voice memo back and forth to hear more about
Speaker 1: the developments at the time. And one of the big
Speaker 1: things that was happening, you know, in the in the
Speaker 1: days immediately following Russia's invasion of the country was the
Speaker 1: crypto community rallied around philanthropy in a way that was
Speaker 1: I don't want to say unprecedented, but at least remarkable
Speaker 1: in that they were donating millions and millions and bions
Speaker 1: of dollars worth of crypto to the Ukrainian government, and
Speaker 1: what was really unusual was that they were doing that
Speaker 1: to the Ukrainian government's or wallets. What was Trabanion's rule
Speaker 1: in making this happen? Right, But he is actually a
Speaker 1: really fascinating character. I mean he when I said that
Speaker 1: I'd heard he was the godfather of crypto E in Ukraine,
Speaker 1: he laughed and said, yes, that's what they called me.
Speaker 1: I was the first guy who actually started publicly speaking
Speaker 1: about the crypto, the first guy who actually did you know,
Speaker 1: to be honest, there's a lot of stuff that I
Speaker 1: did first, like the first at M, first, public trade,
Speaker 1: first company, forced exchange, first, OTC first, you know, a
Speaker 1: lot of first. So we spoke early March, so that
Speaker 1: the war had been getting up just over two weeks
Speaker 1: at that point, and this was the point when it
Speaker 1: was clear that the Ukrainian government was asking or essentially
Speaker 1: forcing or all military age men eighteen plus men to
Speaker 1: stay in the country and fight. So I assumed when
Speaker 1: I spoke to him that he would be somewhere in
Speaker 1: the trenches or you know, we're doing some kind of
Speaker 1: army job. No, I didn't join the army because I
Speaker 1: felt really a good army man. I'm good with guns,
Speaker 1: but only a theory. So my job is being a
Speaker 1: crypto banker for the government. So I'm in charge of
Speaker 1: collecting fundraising, um storing crypto, exchanging crypto to crypto, exchanging
Speaker 1: crypto to FEAT, opening the bank accounts, or for intermediacy
Speaker 1: or for the government, so we can change crypto to
Speaker 1: FIAT and then wire them to our accounts, and without
Speaker 1: those accounts we can buy some wherever. It's required by
Speaker 1: the Ministry of the Bands. And there's some statistics that
Speaker 1: they keep. The numbers keep changing, but the government puts
Speaker 1: them out on Twitter from time to time, the decraining government,
Speaker 1: and they say that's something like I think it's five
Speaker 1: thou it's covery more than that now, um bullet proved best.
Speaker 1: And then there are pictures of them having There are
Speaker 1: pictures as the Deputy Minister of Digital Transformation, which is
Speaker 1: a wonderful title, and he puts on his Twitter feed
Speaker 1: if you ever inclined to look, pictures of armored vehicles
Speaker 1: and weapons and bullet proved best and all kinds of
Speaker 1: things that have been bought with crypto. So it's quite
Speaker 1: quite remarkable. Really, We'll be right back to talk about
Speaker 1: the innovative ways crypto is helping the war effort in Ukraine, Kuna.
Speaker 1: You know, to that point about Germanian being the crypto bancor,
Speaker 1: he has been. I remember one of the stats in
Speaker 1: March was that of the hundred million dollars or so
Speaker 1: that the government had raised at that point, and it's
Speaker 1: way more than that at this point. You know, he
Speaker 1: was managing like sixt of that money on their but
Speaker 1: to buy that military equipment and other supplies that you're describing.
Speaker 1: So it seemed like it's a pretty important and probably
Speaker 1: very complicated rule right now for sure, and also in
Speaker 1: some ways a little bit um. You know, it probably
Speaker 1: goes against the grain a bit of his own background.
Speaker 1: You know, to be working for the state is kind
Speaker 1: of a funny thing for a crypto guy to do,
Speaker 1: but it's so, I guess, all part of this sort
Speaker 1: of patriotic national effort to be the Russians into supplying
Speaker 1: what the people need to Yeah, I'm not sure he
Speaker 1: would have ever imagined that he would be working for
Speaker 1: the government, but that's that's where he finds himself. And
Speaker 1: you're right, it is quite an important, quite an important role.
Speaker 1: The battle for dome Bus remains Russia's strategic focus and
Speaker 1: territorial gains have been slow in the face of stiff
Speaker 1: Ukrainian resistance. Well, I'm glad you raised that point about
Speaker 1: the tension between you know, the the anti government libertarian
Speaker 1: roots of a lot of crypto and a lot of
Speaker 1: people in the scene, and the fact that so many
Speaker 1: people rallied to give money not just to a government,
Speaker 1: but to a military. And you know, it's certainly been
Speaker 1: an interesting and challenging time for I suppose you could
Speaker 1: call them the crypto purists who have been for years
Speaker 1: saying the point of this, of this, these tokens, the
Speaker 1: point of this ecosystem is to avoid government interference of
Speaker 1: any kind. Um And to have you know, a bunch
Speaker 1: of folks who were very influential in the industry. You
Speaker 1: had the heads of exchanges, you had the inventor of
Speaker 1: ethereum all saying hey, this is a good cause and
Speaker 1: we should rally around. That was was really quite remarkable. Indeed,
Speaker 1: I think it exposes a lot of kind of the
Speaker 1: tensions and contradictions within crypto. I mean, here's a kind
Speaker 1: of approve of concept that bitcoin and kind of crypto
Speaker 1: in the border sense has a social utility. Crypto is
Speaker 1: providing almost like a humanitarian service here while in subways
Speaker 1: it's not surprising, but you're right it does. It does
Speaker 1: kind of go against the grain of the ethos yea,
Speaker 1: the kind of anti libertarian stuff indeed, and to the
Speaker 1: point about the G in in in e s G.
Speaker 1: You know, the the idea of corporate government governance. It's
Speaker 1: certainly raised a lot of interesting issues around sanctions and
Speaker 1: sanctions of visions because one of the things that Ukraine
Speaker 1: was also calling for was for exchanges to ban not
Speaker 1: just people who are in the Russian sanctions list, but
Speaker 1: any Russian citizens at all. And even the exchanges that
Speaker 1: have been very supportive of Ukraine's crypto efforts came out
Speaker 1: and said, no, we're not going to do that. If
Speaker 1: somebody is on a sanctions list, we will absolutely comply
Speaker 1: with that sanctions list. We will make sure that we're
Speaker 1: not allowing them to use our services in any way,
Speaker 1: but we're not going to ban everyone with a Russian
Speaker 1: passport from using these services. Yeah, you're right, it is
Speaker 1: really interesting, like be and also what should be the
Speaker 1: response to to the state, um, what should be the
Speaker 1: response to regulators and so on? That is still an
Speaker 1: open question. By the stories about Bonance, for example, you know,
Speaker 1: just shows you that we're in a world of greater
Speaker 1: regulatory and government interests and oversight of the crypto markets.
Speaker 1: So I guess you've got to be careful, how you well,
Speaker 1: crypto businesses have to be more and more careful. Absolutely
Speaker 1: matred here. Yeah, and Binances in the news because of
Speaker 1: a blockbuster router's report that they had been responsible for
Speaker 1: helping to launder a couple of billion dollars worth of
Speaker 1: crypto that was associated with a North Korean hacking group
Speaker 1: known as Lazarus, which they have of course scrupulously denied. Um,
Speaker 1: but certainly something that is going to get to your
Speaker 1: to your point, even more governmental scrutiny and quite likely
Speaker 1: regulation in the coming weeks and months. Exactly, yeah, exactly.
Speaker 1: Was this whole idea about how going back to my
Speaker 1: point of about crypto being sort of providing a social
Speaker 1: good here is that crypto I think the Ukrainians situation
Speaker 1: that the war has proved that bitcoin and crypto can
Speaker 1: provide great utility, great social benefit, but also can be
Speaker 1: used for the finance terrible things too, So that the
Speaker 1: sort of the argument about it's all just drug money
Speaker 1: and terrorist financing. Well maybe, but there's also this side too.
Speaker 1: This is a very in my mind, you're burning in Ukraine.
Speaker 1: It's a very positive story for crypto and bitcoin, that
Speaker 1: it is helping people and desperate needs to fight against
Speaker 1: an oppressor. And you know that's a wonderful story to tell. Well,
Speaker 1: that is a very positive notes on which to end,
Speaker 1: So thank you very much for joining us. Thank you.
Speaker 1: You can find more of his reporting on the Bloomberg
Speaker 1: Terminal on Bloomberg dot com and find him on Twitter
Speaker 1: at Alistair g Marsh on the next episode of Bloomberg Crypto.
Speaker 1: California's Silicon Valley is both a place and a philosophy,
Speaker 1: often hailed as the place for US tech startups to
Speaker 1: get their start. Vcs, or venture capitalists, are an integral
Speaker 1: part of this mythology. These are the people who provide
Speaker 1: the private capital billions of dollars worth, so these startups
Speaker 1: can chase the next big thing. Despite the volatile crypto market,
Speaker 1: some of those vcs are still betting big on the
Speaker 1: potential of the blockchain. For the latest on this, we'll
Speaker 1: talk to Bloomberg reporter Hannah Miller about how Crypto is
Speaker 1: influencing VC and vice versa. I'm Stacy Marie Ishmael and
Speaker 1: this is Bloomberg Crypto, a daily podcast from Bloomberg and
Speaker 1: I Heeart Radio. For more shows from iHeart Radio, visit
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Speaker 1: us on Twitter. We're at Crypto. The supervising producer and
Speaker 1: editor of this episode is Vicky ver Galina. Our producer
Speaker 1: is Mohammed Faruk. Desta wander At is our engineer. Original
Speaker 1: music by Leo Sidron. Bloomberg's head of podcasts is Francesco
Speaker 1: Leafy