Where the Coins Go: Inside Ukraine’s $125M Wartime Fundraise
By Anna Baydakova
In Ukraine, crypto from around the world turns into bulletproof vests, drones and first aid kits. The country’s fundraisers explain how it works.
Cryptocurrencies’ prices might rise or fall, but their capacity to break through borders remains invaluable – especially in wartime.
Since Russia invaded Ukraine Feb. 24 in a countrywide military assault, governments and individuals worldwide have been helping Ukraine survive, sending weapons and money. A notable part of those funds has been in crypto, making a difference on the ground, fundraisers told CoinDesk.
Help is coming
Over $135 million in crypto had been raised by Ukrainian funds by mid-May, analytics firm Crystal Blockchain told CoinDesk. This might look small compared with the $579 million raised in fiat for the Armed Forces of Ukraine but, the crypto community’s support for Ukraine looks strong.
The world had been arming Ukraine even before the invasion, when Russian troops massed along the Ukrainian border. But after the first bombs hit Ukrainian cities, enthusiasm to help the country skyrocketed, said the co-founder of the Palianytsia charity fund, Anton Kosheliev.
Kosheliev is also running a couple of brick-and-mortar businesses in Ukraine, a logistics firm called Joule and a coffee roasting company, Marco. With a community of like-minded Ukrainian entrepreneurs, many of whom are a part of the local crypto community, he co-founded a humanitarian aid effort, which has raised over $2 million.
“We also accepted donations from bank cards, but successful transfers made only about 70% of all,” Kosheliev said. Many people tried donating from abroad; for many countries Ukraine, as well as the whole Eastern Europe region, is a risky area. So the local banks looked at transfers to Ukraine with particular scrutiny, he said, adding, “A significant amount of money failed to reach us.”
Europeans “saw the news and rushed to post offices” to send over packages of help to Ukraine, Kosheliev said. “Everyone wanted to do something so that it all ends.”
Some days up to 30 trucks full of humanitarian supplies would arrive during the day, he said, and all of it needed to be sorted and sent to those who needed them. Palianytsia decided to work only with big aid recipients such as city administrations and hospitals.
“There was a lot of clothing, which needed to be sorted. We hired a bunch of volunteers. Many people were ready to deliver the aid in their cars, even to dangerous places,” he added.
Kosheliev and his fellow entrepreneurs rented a big warehouse and started building a refugee shelter in Lviv, a city in Western Ukraine where the bombs weren’t expected to land as often as in the Eastern part of the country bordering Russia.
“We agreed at the start that we’re a humanitarian organization, not a militant one,” Kosheliev said. “We understood that Lviv is an important hub between Ukraine and Europe, and we need to get the infrastructure ready here to help supply the whole Ukraine.”
The government crypto stash
“More than a half of all merchants agree to accept crypto,” said Alex Bornyakov, Ukraine’s deputy minister of digital transformation. The Ministry of Digital Transformation initiated a fund called Aid for Ukraine, which is raising funds for non-lethal aid for the armed forces.
Bornyakov said that the ministry itself neither accepts donations to its wallets nor spends them; rather, it helps volunteers to fund their purchases. In some cases, volunteers already know what and from whom they are buying but need additional funding to pay the bill, he told CoinDesk. And the crypto treasury is held by the Ukrainian crypto exchange Kuna.
Since the beginning of the war Aid for Ukraine has raised over $60 million in crypto, according to the official website. This consists of over 477 BTC ($14.3 million), 9,587 ETH ($17.1 million), $9.9 million in stablecoins running on Ethereum (USDT, USDC, DAI) and more in other cryptocurrencies.
Most of the donations were large ones from big donors, most of them Ukrainians and entrepreneurs doing business with Ukraine from around the world, Bornyakov said.
It’s impossible to buy weapons with crypto, Bornyakov said, because such deals run on special, stricter terms. However, Aid for Ukraine has successfully bought drones, bulletproof vests and medical supplies. “No one minded receiving crypto as payment. It’s quite normal in the U.S. and Europe now,” Bornyakov said.
Some merchants told the fund they were going to open a Coinbase account and then receive payments to it. Some gave their personal wallet addresses, Bornyakov said, and then decided what to do with the crypto received. Donations in fiat have been much larger, he said, with about 40% coming in crypto.
According to Michael Chobanian, founder of Kuna and Aid for Ukraine’s main treasurer, over half of all crypto donations have been spent in crypto. U.S. merchants sold about 500,000 food kits for crypto. Protective vests, thermal goggles, gunsights and surveillance drones were paid for with crypto.
In some cases, merchants already had crypto wallets or exchange accounts; if not, Kuna helped them go through fast-track verification with the FTX crypto exchange, another partner of Aid for Ukraine. But some “especially stubborn” merchants only agreed to accept fiat, and for them the fund converted crypto to fiat via FTX and then sent it to the seller, Chobanian said.
For smaller charity funds with no direct coordination with the government, using crypto as a payment method proved trickier, said Oleg Kurchenko, founder of the Binaryx.com exchange and co-founder of the Unchain.Fund. According to its official website, the fund raised over $9,5 million in bitcoin, ether, various stablecoins and other tokens, such as SOL, NEAR and AVAX.
Unchain works like a distributed autonomous organization (DAO): Donations come to multisignature wallets on 14 blockchains. To spend them, four out of 10 publicly known signers must confirm the transaction. Being a DAO for the real world, especially at war, is a challenging task, Kurchenko said, because there are no oracles that can fully control the distribution of funds among those in need, and decentralized decision-making can take a long time.
Unchain helps volunteers working on the ground in Ukraine buy food, medicine, electric generators, bulletproof vests and other survival supplies. In most cases, merchants would only accept fiat, so Unchain would cash out its coins via one of the Ukrainian exchanges: Kuna, WhiteBit or Wield.money.
“There were merchants who agreed to accept crypto, but that was rare; often, companies wouldn’t do it because of the regulations” in their countries, Kurchenko said, adding: “If you’re working with a European merchant, how would you explain to them they should report their taxes in crypto?”
Unchain also launched its own debit card for mothers in partnership with Ukraine’s Unex bank. A mom with one child can receive 50 euros a week and with two children, 75 euros. This means each family member would receive about 100 euros a month to support basic needs. According to Kurchenko, about 6,000 people are now using such cards. The grants are in fiat, he said.
Sometimes, non-Ukranians apply for the card to take advantage of the situation, but Unchain’s team can verify whether an applicant is Ukrainian or not, Kurchenko said. He refused to explain the verification process so that fraudsters don’t use this information.
Kurchenko admits that the verification process is running partly on trust: During a humanitarian crisis it’s hard to verify that every single applicant for help actually needs it.
Now, with the war over three months old, the flow of fresh funds is weakening.
“First two months the support was huge, but now it’s dying down. It’s becoming a kind of mundane situation and people don’t feel like donating much to support the initiative,” Kurchenko said. The fund is running out of money, and the bear market for crypto doesn’t help.
“When we needed an ambulance car we were searching all over Europe and we came across a British company that went bankrupt. It had 26 cars, and we bought them for $200,000,” Kosheliev said. The money came in crypto: An intermediary who helped the fund buy the cars accepted crypto to his own wallet. How he later transferred it to fiat money, Kosheliev doesn’t know, he said.
“It was just someone’s cold wallet, and they told us they found a way to cash the crypto out,” he added. The person who arranged the deal from the U.K. side did not want to comment, even anonymously, he said.
The ambulances, he said, ended up in the parking lot of the Healthcare Ministry of Ukraine, after some checks and tuning in local auto repair shops.
Some merchants were open to receiving crypto for medical supplies, including first aid kits and tourniquets (blood-stopping devices) that the Palianytsia fund has been purchasing at scale, Kosheliev said. “Sometimes, people just sympathized with us and were motivated to help us,” he said, so people agreed to receive crypto. These were more special cases than a regular occurrence, he said.
“We actually thought there would be more merchants ready to accept crypto,” he said, adding that in his ordinary business, he dealt with Turkish counterparties a lot, importing food and clothing, and in Turkey, “every merchant knows what crypto is” and would likely agree to accept it. However, this wasn’t the case with the medical supplies, he said.
In Ukraine, when merchants routinely accept crypto, they cash out first and then write it down in their accounting ledgers as cash, Kosheliev said.
Abroad, it’s always peer-to-peer transfers when people on the other side accept crypto and then decide what to do with it.
Keeping it informal
Informal arrangements prevail when smaller, private funds are trying to spend crypto they raised.
Volunteers, who buy supplies to help the army and civilians, have to rely either on cash dollars and euros or crypto, because private bank transfers of large amounts of money across the border simply aren’t possible for ordinary citizens: The National Bank of Ukraine limited sending money out of Ukraine to prevent capital flight, said Matvii Sivoraksha, CEO of blockchain startup MadFish.Solutions. (The restrictions have been recently softened.)
Sivoraksha told CoinDesk he personally convinced a shop in the Netherlands selling surveillance drones to accept crypto just because doing so was faster and easier than fiat alternatives. Legally turning bitcoin into euros on a European Union (EU) bank account took so long that the drone seller had time to discuss accepting crypto with its legal counsel and decide in favor of it.
In Ukraine, “any volunteer or merchant would accept crypto now,” Sivoraksha added.
Palianytsia, which received $500,000 from leading crypto exchange Binance, is using Binance to cash out most of its funds: in most cases, the donations are being spent in fiat, Kosheliev said. To cash out crypto donations, Palianytsia’s operational director sells crypto on Binance through his own account, then puts it into the fund’s treasury as a donation, Kosheliev said.
Palianytsia is also working with Binance on a refugee crypto debit card, Kosheliev said: The fund is verifying aid beneficiaries, who would each receive three tranches of $75 in crypto. Since the project launched in late April, Palianytsia’s volunteers have verified and onboarded about 1,000 people, Binance told CoinDesk.
“The team has put in place an on-the-ground verification process to identify the most vulnerable populations including single mothers, those suffering with illnesses and ethnic minorities. We are grateful for their and our other partners’ unrelenting efforts, which means we’re able to reach more people, quicker,” a Binance spokesperson said in a written statement.
Kosheliev said he has met with refugees in Ukrainian shelters a few times and helped them set up the Binance mobile app. His colleagues shot a video on their phones: Kosheliev is sitting on a bench with a group of women crowding around him, listening and looking at his phone.
“My friends were joking that I’ve never been that popular with the ladies before,” he said with a giggle.
Ultimately, crypto offers a way for individuals to coordinate and help outside government control, while staying transparent, Kosheliev said: “We trust the community more than we trust the government. The community helps check and validate people.”
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