Home / Markets News & Opinions / Turmoil in Ukraine Shows Bitcoin’s Potential as a Global Currency

Turmoil in Ukraine Shows Bitcoin’s Potential as a Global Currency

Last Updated May 16, 2023 3:31 AM
Guest Writer
Last Updated May 16, 2023 3:31 AM

The current political and economic environment in Ukraine  has led to credit downgrades for local banks , a currency devaluation capital controls , and ATMs running out of cash . Before this article continues there is one thing that needs to be mentioned: Bitcoin users not affected . While Bitcoin obviously couldn’t help when it comes to preventing the violence currently taking place on the streets of Kiev , it at least helps people who want to protect their wealth in times of political uncertainty. Bitcoin still needs to get through some problems of its own when it comes to stability, but the current events in Ukraine can be used as a case study for why cryptocurrency is so important to the entire world.

A Political Crisis Leads to a Currency Crisis

The hryvnia has already declined more than 10% against the US dollar since November, and Tim Ash from Standard Bank believes this trend could continue over the next few months. He was recently interviewed by Reuters , and he claimed that it could soon take 11 hryvni to equal 1 dollar. In a situation where Ukraine is not able to get more economic assistance from the international community , Ash believes we could see a situation where it takes 15 hryvni to buy 1 dollar. Although this kind of currency crisis currently leads to a thriving black market in dollars and euros, it could be bitcoins that become the more practical safe haven for people in the future.

a graph showing the us dollar per 1 uah
The hryvnia has declined against the US dollar. Chart via XE.com.

In a future where bitcoins are a widely-used international currency, citizens of a country experiencing political turmoil would not need to worry about the devaluation of their local currency. People holding hryvni in their Ukrainian bank accounts or in the form of cash under their mattresses have basically been robbed of 10% of their savings since November. If some predictions turn out to be true, they could be losing close to 50% of their savings as a solution for government debt is not found. If bitcoins were able to reach a stable price , the Ukrainian people would not have to watch their savings disappear as a political uprising slowed down economic activity in the surrounding areas.

Bank Downgrades and Empty ATMs Don’t Affect Bitcoin Users

Various banks in Ukraine have been downgraded by Fitch  and Moody’s  over the past few months, and these downgrades are due to these banks’ exposure to Ukrainian government bonds. Ukraine could be headed towards a bank bailout or bail-in  situation, and either “solution” should be viewed as a lose for the Ukrainian people. If the government defaults on its debts, then most bank depositors in Ukraine will need to take a “haircut “.

Residents of Kiev are also emptying stores shelves and ATMs  around the city. People don’t want to leave their homes and wish to hold as much cash as possible. It is not yet clear if this is an actual run on the banks or just people who would rather have access to cash rather than cards during these uncertain times.


One of the obvious benefits of Bitcoin is that you don’t need to trust a third party with your money. Cash under the mattress is a classic option when you don’t want to trust banks, but you can’t send cash through the Internet. Holding bitcoins in a brain wallet paper wallet , or cold storage hardware device is also much more secure than putting a bunch of cash under one’s mattress. There’s no need to empty out a local ATM when you can store all of your bitcoins in your brain. The only issue here is being able to transact in bitcoins in an even worse situation where there is no Internet or electricity. Having said that, there are bigger issues at hand than being able to spend money if there’s no electricity to be found.

You Can’t Place Capital Controls on Bitcoin

As the value of the Ukrainian hryvnia was declining in early February, the Ukrainian Central Bank started to limit the amount of foreign currency that Ukrainians could purchase . The limit is currently set at just under $6,000 per month. This restriction has been able to prevent continued damage to the hryvnia’s value against other currencies, but whether or not it will be able to help over the long term remains an unanswered question. Although the intention of this policy is to prevent the local currency from falling in value, it also limits the options of the Ukrainian people who just want to find a safe haven for their savings.

Bitcoin users are not affected by capital controls, and it doesn’t matter if those economic restrictions are found in Ukraine or Argentina. Capital flight to another country wouldn’t even exist in a Bitcoin economy because bitcoins would be a global currency. There would be no reason to flee the bitcoin because the declining national economy would not have an effect on the price of bitcoins. Having said that, bitcoins can offer a way around capital controls while most of the world is still on a fiat standard. Governments always try to micromanage macro economies, and they usually just make matters worse when they try to limit what people can do with their own money. Whether it’s the United States government paying farmers to destroy crops and livestock during the Great Depression  or China devaluing their currency to increase exports to other countries, government involvement in the economy usually has negative side effects for everyone.

Bitcoin Still Needs to Sort Out Its Own Issues

While Bitcoin has the potential to solve a lot of issues involved with the economies of unstable nations, we’re still far away from it being viewed as a “safe haven”. As we’ve seen over the past few months, regulatory uncertainty and goxxings still have a negative impact on price stability. Bitcoin has a lot of growing up to do, but you have to wonder how much stabler the price will be once most nations have stated their regulatory intentions and MtGox is behind us. A currency that swings 10% in either direction on a daily basis would actually be preferable to some current fiat currencies, especially when you throw in the aforementioned abilities to get around economic restrictions and banks. Relatively large swings in price over the short term are sometimes preferable to a 50% decline over a year or two. The success of Bitcoin certainly isn’t set in stone, but it could definitely become a solution to many of the economic ailments facing specific parts of the world today.