The vast majority of all Russian and Ukrainian crypto transactions are sent to overseas platforms – and tokens are ending up in Western Europe, East Asia and North America, a new report has found.
These were the findings of the latest Geography of Cryptocurrency Report published by the New York-based blockchain analysis firm Chainalysis.
The data shows that some 86% of all cryptocurrencies sent from addresses in Russia and 87% of cryptocurrencies sent from Ukraine ended up at overseas addresses in the period July 2020 to June 2021. Only Turkey-based crypto investors sent more crypto to overseas addresses – with 92% of their crypto transfers made to non-Turkish addresses.
In May 2021 alone, almost USD 8bn worth of crypto was transferred out of Eastern Europe to Western European countries, with over half that amount also ending up in North America, East Asia, and the Central and Southern Asia region.
Chainalysis wrote that “both Russia and Ukraine appear to send a much larger than average share of cryptocurrency to other countries.”
It also hinted that the nations may have experienced crypto-powered “capital flight” this year, explaining:
“It’s impossible to say for sure how much cryptocurrency-based capital flight is happening in any given country, but the data suggests it may be happening in Eastern Europe generally and Russia and Ukraine specifically.”
The analysts claimed that a “widespread distrust of institutions” was evidenced, and could possibly explain why Russians and Ukrainians were so keen to ensure their crypto was located elsewhere in the world – pointing to the latest Edelman Trust Barometer. The latter found that Russians confidence in companies, banks, government, and the like was the lowest of all surveyed countries.
In addition, Chainalysis added that “tax avoidance may also be part of the cryptocurrency adoption story in Eastern Europe, particularly in Russia and Ukraine,” as “both countries make it difficult for citizens to send large sums of money abroad.”
Furthermore, scammers may play a part in the equation: The firm noted that Ukraine “accounted for most” of such activity, as it “sends more web traffic to scam websites than any other country, more than doubling the total web visits of the second-ranked country.”
However, there was also a suggestion that Russians may be looking to move their money out of the country because they have simply seen the writing on the wall. A number of larger Russian crypto exchanges have relocated overseas in recent years.
Just this week, Russia’s Ministry of Finance has hinted that crypto exchanges may have to leave the country, although the ministry (unlike the staunchly anti-crypto Central Bank) says it is not opposed to citizens trading crypto on overseas trading platforms.
As such, “despite a drop in peer-to-peer crypto activity,” the Chainalysis report authors noted that “Russia and Ukraine exhibit high transaction volumes on centralized cryptocurrency platforms, both overall and for transactions at the retail level specifically.”
As relatively few of these larger “centralized cryptocurrency platforms” now operate on Russian soil, it is possible that Russians are buying tokens which they then send to more reputable and larger exchanges and wallets located in international locations.