Ukraine turns to NFTs following crypto fundraising effort

4 Mar 2022

Image: © ink drop/Stock.adobe.com

As Ukraine shifts focus to NFTs, one of the big marketplaces for these assets is cracking down on users from sanctioned countries.

The conflict in Ukraine has pushed crypto into the spotlight, and now the country’s government said it plans to issue NFTs to fund its defence against the Russian invasion.

Mykhailo Fedorov, Ukraine’s vice prime minister and now a prominent figure on Twitter, tweeted yesterday (3 March) that the government would “soon” roll out NFTs.

Future Human

NFTs, or non-fungible tokens, are unique digital files with ownership recorded and verified using blockchain technology. After a surge in interest last year, the NFT market surpassed an estimated $40bn in value.

While Fedorov did not give any further details of Ukraine’s NFT plans, he said they would help pay for the country’s military. It’s the latest sign of the Ukrainian government turning to digital assets.

Since the conflict began last week, Ukrainian officials have appealed for people to donate in cryptocurrencies such as bitcoin, Ethereum and Tether to back the Ukraine government and an NGO that supports its military.

Blockchain analytics provider Elliptic now puts the fundraising figure at $55.7m from more than 105,000 crypto asset donations.

Ukraine had planned an airdrop to reward these crypto donors. This is when a cryptocurrency token or coin is issued for free, and is something usually employed in the crypto community to encourage participation in a project.

But in Fedorov’s message yesterday, he said that the airdrop was being cancelled and the country has no plans to issue fungible tokens such as cryptocurrencies.

This came after reports of an airdrop that was spoofing the Ukrainian plans.

Decentralisation debate

Meanwhile OpenSea, the marketplace for NFTs, is blocking users based on the US sanctions list. This prevents US companies from providing goods and services to countries such as Iran and Syria.

“Our terms of service explicitly prohibit sanctioned users or users in sanctioned territories from using our services,” an OpenSea spokesperson told Cointelegraph.

“We have a zero-tolerance policy for the use of our services by sanctioned individuals or entities and people located in sanctioned countries. If we find individuals to be in violation of our sanctions policy, we take swift action to ban the associated accounts.”

Crypto wallet MetaMask and infrastructure service Infura are also blocking users based on US sanctions, which drew attention this week when a geoblock was applied too broadly and the service was made inaccessible to users in Venezuela.

Following the invasion of Ukraine, Russia was hit with economic sanctions from the US, EU and other nations, aimed at cutting the country off from global finances.

This led to concerns that individuals and organisations in the country would turn to crypto or other digital assets to bypass restrictions, particularly as some of the biggest cryptocurrency exchanges are not taking action on Russian users.

The crypto space is based on decentralisation, and a spokesperson for Binance told CNBC earlier this week that a blanket ban on Russian users would “fly in the face of the reason why crypto exists”.

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Sarah Harford is sub-editor of Silicon Republic

editorial@siliconrepublic.com