Digital assets are playing an increasingly significant role in conflict-ridden countries, offering new avenues for financial transactions and economic stability. Ukraine and Syria are experiencing economic devastation from both war and sanctions. In an effort to fight these concerns, each country is looking to cryptocurrencies as a means to circumvent any financial regulations and stabilize their economies.

Ukraine has been at the forefront of this and has already passed legislation on the legal status of crypto. At the same time, Syria’s government has begun to draft legislation to regulate digital currencies. This adoption is a testament to the critical role digital assets have played in areas experiencing economic unrest. We know that cryptocurrencies can make significant, even revolutionary contributions to many sectors. They also pose significant dangers like short-term financial disorderliness and adverseness gaming.

Ukraine's Embrace of Virtual Assets

In March 2022, following Russia’s invasion of Ukraine, the Ukrainian parliament adopted the “On Virtual Assets” law, formally establishing the legal status of cryptocurrencies in the country. This legislation that the two senators crafted opened up a regulatory framework for digital assets, allowing adoption and use to flourish. The National Bank of Ukraine regulates crypto-related activities. At the same time, the National Securities and Stock Market Commission has a very important role in this control mechanism.

Since the law passed, Tether (USDT) has become the most commonly used form of exchange. As measured by CoinMarketCap’s data just traded volume over $52 billion has been traded. The increased trading volume of Tether and other cryptocurrencies have allowed Ukraine to raise just under $225 million worth of various cryptocurrencies. This wave of digital assets has offered a key financial lifeline, powering humanitarian efforts and boosting the country’s economy.

Digital currencies allow citizens of those countries to evade sanctions placed on them by Western international financial institutions. Bitcoin (BTC), the creation of pseudonymous developer Satoshi Nakamoto, is meant to give power back to individuals with peer-to-peer (P2P) transactions without centralized authority. It’s largely the decentralized nature of cryptocurrencies that let individuals go around traditional financial constraints. As a result, this flexibility has helped facilitate the continuous infusion of funds, resources, and expertise into the country.

Syria's Path Towards Crypto Regulation

Unlike Ukraine, Syria lacks formal crypto regulations. Yet the government of Syria is currently working on a law to regulate digital currencies. The latest announcement reflects an important shift, understanding the promise but more importantly the risks of digital assets.

Syria today suffers from some of the world’s worst economic conditions, with hyperinflation and currency depreciation at horrifying levels. Annual inflation in Syria has averaged over 100% the past four years. During the same timeframe, Syria’s national currency has lost more than half its value, collapsing 30 times its worth. In today’s rapidly changing economic landscape, digital currencies are quickly becoming one of the most effective hedges against hyperinflation. They store value and provide a less volatile unit of account.

While the ability to channel humanitarian aid through these new technologies would be a major advantage, their introduction brings worries about their potential abuse. The risk of unintended funding of terrorist groups is among the most serious risks posed by digital currencies. Meanwhile, Syria has been working diligently to establish its own regulatory framework. It’s imperative that we tackle these risks to make sure digital assets are used responsibly and securely.

Global Perspective and Future Implications

The market for stablecoins alone has surpassed $66 billion in 24-hour trading, demonstrating the rapid global demand for these digital currencies. Bitcoin has beaten all fiat currencies and historical assets on long-term percentage increases. This performance, along with growing institutional investment, reinforces the confidence in crypto’s long-term potential both as a store of value and investment asset.

As more countries face economic instability and political turmoil, the role of digital assets will only grow. The experiences of Ukraine and Syria offer valuable insights into the potential benefits and challenges of adopting cryptocurrencies in conflict zones.

The protection that digital assets can provide in conflict zones is not without risk. Criminals can take advantage of the anonymity and decentralization that cryptocurrencies offer to engage in illegal activities. That ranges from felonies such as money laundering to financing terrorism. We need to meet these dangers head-on with robust standards and international collaboration. By taking these steps, we can help put digital assets to work in more responsible and ethical ways.