Inside Ukraine’s digital ministry and crypto efforts during wartime

As we speak from approximately 5,000 miles apart, Alexander Bornyakov will not specify where he is located.

It’s still in Ukraine, but not in Kyiv, and either way, it’s definitely short on natural light. Bornyakov is, for his part, visibly short on sleep in the way that all of Ukraine’s officials have been for going on two months now. He gestures with a green e-cigarette firmly in his hand. It is a remarkably digitized version of life during wartime.

At one point, he goes offline to answer another call, this one from Chernihiv, less than 100 miles north of Kyiv. “Chernihiv is going to become the next Mariupol if we don’t somehow change this,” he says as he returns to my screen.

It’s a strange moment in Ukraine’s history that Bornyakov, who is second in command at the Ministry of Digital Transformation, or MinTsifry, has found himself a key link in a war effort.

“Of course, there was the conflict in the eastern part of Ukraine,” Bornyakov says. “But then it turned out that they wanted to just completely destroy Ukraine. So we almost entirely stopped everything that we were doing before. And we realized early that we’re not going to win on our own. If we’re going to stand alone, it’s going to turn very bad for us.”

War3

Prior to joining the brand-new MinTsifry in 2019, Bornyakov was involved in a series of tech and IT startups in Kyiv, New York, and his hometown of Odessa. It’s hardly a traditional military background, but it is a unique advantage in a war that has centered digital engagement.

Engagement in this context has meant international support — weapons, training and money — for the Ukrainian war effort, global sanctions on Russia’s economy, and the need to unify Ukraine itself.

Critical to this appeal to the outside is the MinTsifry’s solicitation of crypto donations to fund Ukraine’s war effort, beginning at the end of February. “There was a huge problem with transfers because national banks severely limited the ability to send transfers,” explains Bornyakov.

The initiative actually began with Michael Chobanian, founder of Ukrainian crypto exchange KUNA, who set up wallets to receive donations which MinTsifry would later onboard as the government’s official accounts.

As of April 1, the government’s official donation platform had raised over $70 million in cryptocurrencies.

The government donations amount to a percent and a half boost on a national defense budget that the most recent World Bank data puts at roughly $5.4 billion. The donations further pale in comparison to a $13.6 billion emergency package for Ukraine that entered the US’s budget bill earlier in March.

But the crypto donations through MinTsifry did provide a platform for individuals to support Ukraine’s fight personally, without reliance on an intermediary.

The crypto industry reacted enthusiastically, particularly as Ukraine’s use of crypto in donations served as a handy counternarrative to widespread concern over Russia’s hypothetical use of crypto to evade sanctions. Indeed, Michael Chobanian would appear before the Senate Banking Committee to talk about his experience fleeing his home and setting up crypto donations.

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But the donation platform is part of a broader push for engagement in a war that has been documented on social media to an unprecedented degree. At MinTsifry, that has included Twitter.

“Prior to the war, we didn’t use Twitter, because it’s not popular in Ukraine,” says Bornyakov. That would change in a big way. For example, the vice prime minister and minister of MinTsifry, Mykhailo Fedorov, has seen his follower count grow from under 20,000 to almost 260,000 in the past month.

Fedorov has, in turn, used Twitter to praise the crypto industry, writing at one point: “Dear crypto community, you are awesome!” But it’s a platform that Fedorov has also used to pressure businesses to cut off Russian operations, asking crypto exchanges to leave Russia the day after pushing requests for crypto donations:

Given that Russia and Ukraine produce a disproportionate number of the world’s best IT professionals as well as hackers, observers have spotlit the digital front since well before Russian forces moved on Kharkiv and Mariupol. But those sorts of hard hacks have largely faded from the narrative around the war.

Crypto, however, has not.

Peace?

Ukrainian president Volodymyr Zelensky has largely found himself occupied with wartime concerns. Nonetheless, the curious prominence of crypto pushed a law legalizing the industry to the top of Zelensky’s desk just weeks ago after years in the making.

“We spent almost three years to pass this legislation before the war parliament signed it,” says Bornyakov. “[President Zelensky] decided to send a strong signal that we are a crypto-friendly country. We, one day — once we win the war — we’re going to invite all companies to work in Ukraine and to move their business here.”

The specific utility of crypto in Bornyakov’s estimation is both in providing jobs and taxes and in upgrading Ukraine’s financial system. “There is no other industry that grows so fast. And after the war, we’re going to need a lot of resources to restore our infrastructure and the way we live.”

One lingering question is the actual length of the war itself. Though as of writing there have been positive signs coming out of peace talks, the end is not yet in sight. The longer the war lasts, Bornyakov says, the less likely that displaced Ukrainians will be able to return to their old lives. “When I was in Kyiv I woke up to jets firing, rockets firing. You can’t work in this environment,” he says laconically. 

Another open question is the economic benefit of the crypto industry. Prior to the war, MinTsifry’s most prominent project was DIIA, which aimed to move as many government services as possible online.

Part of the urgency behind the DIIA project was the legendary inefficiency and corruption that plagues Ukraine’s civil and business processes. As Bornyakov wrote in October, “digitalization in Ukraine has proven to be an effective tool against corruption. After all, the computer does not accept bribes.”

There have been many jurisdictions that have invited the famously mobile crypto industry to set up shop. These have seen remarkably different results; some have become functional local economic engines, while others have turned into short-term offshore free-for-alls.

Time will tell which shape Ukraine’s digital transformation will take.

© 2022 The Block Crypto, Inc. All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.