Ukraine jumps onboard the crypto and NFT express to fund its war effort

It used to be the case you bought “stuff” with cash, then credit cards, then cryptocurrencies, and now the latest fad is Non-Fungible Tokens (NFT’s). And, piling in on this trend in a dire time of need, and also in a world first when it comes to funding war efforts, the embattled country of Ukraine has announced it will issue NFT’s to fund its armed forces, as cryptocurrency becomes an increasingly popular means of giving support to the government in Kyiv.

Mykhailo Fedorov, Ukraine’s vice-prime minister, said on Twitter on Thursday that the government would soon issue NFTs to help pay for its military.

NFTs confer ownership of a unique digital item, with pieces of virtual art proving particularly popular, upon their buyer, even if that item can be easily copied. Ownership is recorded on a digital, decentralised ledger known as a blockchain.

Fedorov did not give further details of the NFTs but said the government had cancelled earlier plans to reward cryptocurrency donors with an airdrop, a free digital token typically used by the crypto community to encourage participation in a project.

The move comes as a Ukrainian appeal for cryptocurrency donations passed $50m (£38m), after Fedorov posted a request for donations in Bitcoin, Ethereum and Tether on Twitter last week.

The appeal has now raised $54.7m for the Ukrainian government and a Ukrainian NGO, according to Elliptic, a blockchain data and analytics company. Most of the funds have gone to the government, with a smaller amount being sent to Come Back Alive, an organisation that funds the “real-time needs of defending Ukraine”.

According to Elliptic there have been more than 102,000 cryptoasset donations since the start of the invasion last week, including a $5.8m donation by Gavin Wood, the British co-founder of the blockchain platform Polkadot. Elliptic added that a donation worth $1.86m appears to have originated from the sale of NFTs originally intended to raise money for Julian Assange, the WikiLeaks founder. A CryptoPunk NFT worth $200,000 has also been sent to the Ukrainian government.

“The majority of donations received to date have been in bitcoin and ether, although US dollar stablecoins contribute a significant proportion,” said Elliptic this week. The company added, however, that scammers also appear to be piggybacking on the fundraising drive by tricking users who are attempting to donate to Ukrainian causes.

The global NFT market reached $25.5bn last year, according to DappRadar, a firm that tracks sales, marking a meteoric rise from just $100m in 2020. The soaring value of NFTs has prompted warnings from sceptics that the craze for the tokens bears all the hallmarks of a speculative bubble. DappRadar’s head of finance and research, Modesta Masoit, said the Ukraine move was a “watershed moment” for cryptocurrencies and blockchain technology.

Obviously though Ukraine has also raised more substantial sums via conventional means. Last week it raised £200m in a sale of war bonds and is in discussions with the International Monetary Fund and World Bank over raising further funds. So is all this the beginning of yet a new trend? Yes.

And then, of course, all of this leads us to the question of: If you did invest in a war effort like this one, as part of an NFT Fractional Ownership scheme, then could you also benefit from the dividends of war such as the capture and sale of assets? An ethical dilemma awaits in the near future ...