Crypto Corner: Ukraine Joins The Bitcoin Boom

We’ve talked about how interest in crypto currencies is coming from corporate retailers and payment networks responding to street-level consumer demand, but the real excitement is coming from more official channels.

Ukraine has made Bitcoin and Ethereum legal tender just this month. While President Zelenskyy had rejected a similar bill in September of last year, a lot has changed since then . . . namely, over $100 million in crypto donations to help the country fight off Russian invaders.

The avalanche of donations began shortly after the National Bank of Ukraine announced that it would no longer issue electronic funds in the government-issued currency but would instead freeze exchange rates and limiting cash withdrawals at banks.

Now crypto is flowing freely into the county while fiat money stalls. It’s the classic “use case” that advocates of electronic currency have been making for years.

The country’s Deputy Minister of Digital Transformation, Alex Bornyakov, has been keeping the world abreast of the situation via Twitter, calling cryptocurrency donations critical to its war and humanitarian efforts.

The donations have allowed the country to purchase 5,500 bulletproof jackets, 410,000 packed lunches, 500 ballistic plates for bulletproof vests, 3,125 thermal imagers and optics, 500 helmets, 3,427 medications, and 60 walkie-talkies.

Ukraine Isn’t Alone

While Ukraine is the latest country to make cryptocurrency legal tender, it’s not the first. Last September, El Salvador ventured into uncharted waters by officially being the first country to make Bitcoin legal tender.

Not only did El Salvador legalize crypto, but also promoted its use by giving the equivalent of $30 in free bitcoin to citizens who signed up for the country’s national digital wallet (“Chivo”) and allowing foreigners investing three bitcoins in the country to be granted residency. With this, Bitcoin became legal currency alongside the country’s other national currency . . . the U.S. dollar

President Nayib Bukele has hailed the currency as a godsend for the millions there who don’t have traditional bank accounts. About 70% of Salvadorans don’t have access to traditional financial services.

He also says that the use of Bitcoin is an effective way to transfer the money that those from the country living abroad send back to friends and relatives every year. An outspoken cryptocurrency enthusiast, he has said that the “paradigms of the past” must be broken and that his country “has the right to advance toward the first world.”

The government itself holds 550 Bitcoin (equivalent to about $26 million), although not everyone in the country agrees with the move. A poll by the Universidad Centroamericana José Simeón Cañas found that 67.9% of people disagreed with the decision, with many indicating that they don’t understand the currency or how to use it.

There has also been pushback from the international community, with some calling it unconstitutional.

The Ultimate Haven: Switzerland

While not impacting the whole country, the city of Lugano in Switzerland is planning to make Bitcoin legal tender and to allow citizens to pay for public services and taxes using the crypto.

The announcement came via a livestreaming event which included City Director Pietro Poretti, Mayor Michele Foletti and Tether CTO Paolo Ardoino. Tether’s stablecoin USDT will also become legal tender in the city.

Thus far, the city has already worked with over 200 merchants to push forward the adoption of Bitcoin and an initiative, called Plan ₿, has been introduced.

The initiative will create a physical venue in the heart of the city in hopes that it will act as a hub for startups and as a centralized location for hosting meetups, workshops, and networking events around cryptocurrency and blockchain technology.

Back To The US Of A

As far as how the United States is handling these adoptions, it has been a mixed bag: alarm in some regards and wanting to follow suit in others.

On February 16, the Senate introduced the Accountability for Cryptocurrency in El Salvador Act (ACES Act), which has now been passed by the Foreign Relations Committee. The bill aims to mitigate the risks associated with the adoption of Bitcoin as legal tender in El Salvador.

Under the ACES Act, federal agencies will be tasked with the responsibility of examining any potential risks to the U.S. financial system caused by the adoption of crypto as legal tender by El Salvador.

That being said, there have also been steps taken in some parts of the country to follow suit. As it stands, the U.S. Constitution allows states to determine what represents legal tender, and several states are proposing bills that would allow for people to pay for government services using cryptocurrency or that would make crypto legal currency in those states altogether.

Leading the pack are Colorado, California and Arizona. California political advisor Ian Calderon recently announced a plan to make Bitcoin legal tender in the state.

The announcement came close on the heels of a similar announcement in Colorado that the state wants to allow citizens to pay taxes using different cryptocurrencies. If state leadership in California gets their way, Californians would be able to use crypto to pay for rent, groceries and city services like license renewals.

The bill will create safeguards for consumers and offer regulations to make sure the legality of interacting with the currencies is clear in both the public and private sectors. And lawmakers have said that any crypto accepted by the state’s government would immediately be converted into fiat currency or held as crypto for reinvestment.

Currently, the only other state in the nation pursuing crypto as legal tender is Arizona. However, with a recent EO signed by President Biden, that may well change.

On March 9, Biden signed an executive order which calls for the responsible development of digital assets which will address issues such as making sure consumers are protected from systemic financial risks, the prevention of the use of crypto for illegal activities, and how to make crypto markets less volatile.

It appears that Biden has taken note of the growing interest in crypto and is acting to make sure the U.S. keeps pace. The future is coming.