As crypto-focused and crypto-friendly FinTechs follow Wise’s lead in cutting off remittances to Russia, the core neutrality principle that bitcoin brought to the industry is being tested, financially and morally.
Along with FinTechs Wise and Zepz (formerly WorldRemit), two outside-the-bank-system remittance firms with strong crypto payments ties — Ripple partner TransferGo and Coinbase partner Remitly — have cut off citizens of Russia and its allies.
While they cited sanctions like the ones that have cut many Russian banks out of the SWIFT payments messaging system, there’s clearly a moral component to the decision.
That was clear in a Feb. 28 WorldRemit Twitter message, which noted that all “money transfer services to Armenia, Belarus, Georgia, Kyrgyzstan, Moldova, Russia and Tajikistan have been suspended.” While Russia and Belarus are under strong sanctions, the rest are largely supporting Russia or declining to participate in sanctions following the invasion of Ukraine.
And while Wise — formerly TransferWise — has capped transfers to Ukraine at $2,500, it made clear in a blog post that the move was due to operating difficulties on the ground. Wise also waived fees on $667,000 in transfers to Ukraine for a day, saying it was “to help customers who may have emergency needs.”
Payments Beyond Politics?
Bitcoin’s pseudonymous creator, Satoshi Nakamoto, designed bitcoin as a payments technology outside of the control of the traditional banking and finance system, but also outside the political control of finance that fiat currencies provide national governments.
In many ways, that’s why the reaction to Meta’s Libra/Diem stablecoin initiative received such an angry reception from governments and politicians: by creating an international currency usable by billions of Facebook users, the social media giant was cutting the feet out from under the political powers that be.
And that thinking can be seen, to an extent, in the refusal of top cryptocurrency exchanges including publicly traded Coinbase and Binance, the world’s largest exchange, to cut off all Russian accounts — something Ukraine’s government publicly requested.
Which isn’t to say that not punishing non-sanctioned Russian citizens isn’t a big factor in those decisions, but the pseudonymous nature of Bitcoin and other cryptocurrencies makes it very difficult to effectively block sanctioned individuals
And, of course, scores of crypto-industry fundraisers and donations to Ukraine have been pouring in, especially as the government has issued an appeal and set up wallets for bitcoin, ether and solana — the latter likely after a $5.8 million donation by its founder necessitated the creation of such an account anyway.
The country has been selling NFTs and has promised donors an “airdrop” — referring to the process of giving early crypto project adopters free tokens as a reward as it advances — although what cryptocurrency or NFTs Ukraine was sending wasn’t made clear.
Crypto in Crisis
On the crypto remittances side, TransferGo is a user of international payments firm Ripple’s RippleNet, a network of more than 300 banks worldwide that use the XRP cryptocurrency token (often inaccurately referred to as ripple) to process what are effectively real-time payments. Ripple says it transactions finalize in a few second to a few minutes, and at a cost of pennies — far faster than what SWIFT can provide.
As for Remitly, the impact of cryptocurrency transactions in Ukraine and Russia is theoretical, as the only announced the launch of a pilot program in Mexico on Feb. 15. Under that partnership, it is providing a fiat off-ramp for Coinbase customers sending each other crypto.
That said, the firm’s tie-up with a top crypto exchange points to a shortcoming with crypto’s use as a payments tool in times of crisis: until there is wide, or at least wider, acceptance of cryptocurrency as a payment rail by merchants at the point of sale, its utility is limited in places where the traditional financial system is breaking down.
Until they can be used widely at the point of sale in good times, bitcoins aren’t much use as a peer-to-peer crisis currency. Especially if they have to go through the traditional finance system — such as Visa- and Mastercard-branded debit card — or the up-and-coming FinTechs that ultimately hope to replace them.
While there are growing signs that this is happening in hyperinflation-wracked and sanctions-hit Venezuela, where crypto payments are now accepted not just by local merchants but at mainstream locations as diverse as Pizza Hut franchises and the national airport, the story of Venezuelans turning to Bitcoin in large numbers date to 2016.
Read more: PYMNTS.com Venezuela
Of course, this is a problem the traditional safe have investment, gold, also has as a currency in times of war and other crises — it’s very hard to buy groceries as bullion. For that there is really only one truly global currency, and that is the U.S. dollar. Whether bitcoin and other cryptocurrencies can fill that niche remains to be seen. So far, in both Ukraine and Russia, the answer is not yet.