When President Putin ordered his military forces to invade Ukraine, this decision set off a worldwide ripple effect. Steadily increasing sanctions from many countries followed the swift condemnation of the invasion from global leaders. A brief but massive dip in the US stock market accompanied rising prices in the energy sector. Intense ground fighting of Ukrainian troops and civilians against Russian invaders mixed with an outpouring of near-universal support for Ukrainians.
These events only scratch the surface of the most significant war on the European continent since World War II. Unlike the global conflict from the last century, it is much easier to send financial aid to support humanitarian or war efforts. Conversely, the ability to freeze assets and immediately cripple economic power happens within hours or even minutes. It seems likely that eventually, the imposed sanctions will affect many companies, including FinTech, in places outside of Russia, such as New York.
Much of the conflict’s focus in Ukraine centers on the geopolitical ramifications and the very human stories of heroism and tragedy – as they should be. However, our globally connected economy and integrated financial industries help make FinTech a growing factor in the Russian war. International sanctions are the primary tool currently deployed by many countries. Some of these sanctions target sending and receiving money and accessing financial assets. In each case, FinTech plays a role in the effectiveness of these sanctions. As a prominent FinTech app developer that has worked with organizations and individuals all over the world, including Ukraine, we stand with the Ukraine people and hope this piece sheds some light on how FinTech will play a major role in how these wars develop.
As the NATO nations imposed severe sanctions on Russia and wealthy individuals close to Putin, many FinTech companies followed suit. The primary action FinTech companies took involved severely restricting money transfers to and from Russia. Wise, a London-based FinTech company, imposed stringent amount limits on money transfers. Similarly, Paysera, based out of Lithuania, suspended all transactions of the Russian Ruble.
Successfully restricting the movement of money to and from Russia hampers their war machine. However, these limits, caps, or suspensions sometimes impact the ability to render aid to Ukraine. Only within the last year did Ukraine open its first virtual bank. Monobank allowed customers in Ukraine to conduct transactions from their mobile devices. Ironically, in 2021, a Russian-backed consortium tried but failed to purchase Monobank. Near the outset of the invasion, mobile electronic transactions became difficult for Monobank.
Crypto’s Role in the War
One area of FinTech that doesn’t seem negatively impacted by the war is cryptocurrency. It appears for some cryptocurrency companies the Russian war in Ukraine proves to be beneficial. Part of this reason is that cryptocurrency is one of the main ways people financially support Ukrainians affected by the war. Another part is the possibility of crypto providing an avenue for Russia to mitigate the sanctions imposed against them.
Shortly after the war began, cryptocurrency rapidly became the financial aid of choice to support Ukraine. One reason for this was the interruption to ordinary means of sending money. The Ukrainian central bank suspended electronic cash transfers, but this does not affect cryptocurrency. However, many people in Ukraine either lost or didn’t have the means to access crypto. To help with this effort, some non-governmental organizations stepped in to fill this gap.
Cryptocurrency is also where things get a little murky. Cryptocurrency remains largely unregulated on a global scale. While sanctions can freeze assets held by wealthy Russian Oligarchs or hamper the Russian economy, crypto may allow an alternative method to access funds. Sanctions aimed at cryptocurrency could circumvent this financial avenue, as recent actions by the Canadian government demonstrated. However, if some governments aligned with Russia allow and accept cryptocurrency, they could lessen the impact of the international sanctions.
The Society for Worldwide Financial Telecommunication (SWIFT) is the world leader in financial messaging. Amongst the harshest sanctions considered and eventually implemented was banning major Russian banks from using SWIFT. This act was a significant step in cutting Russia off from the global financial system.
This move is significant because SWIFT is an integral part of the international payment system. With some Russian banks no longer allowed access, making international transactions is challenging, if not impossible.
SWIFT is not the only company that provides this service. Russia implemented a similar system called SPFS, although only a few nations engage with it. It remains to be seen whether SPFS will bridge the massive gap caused by Russian banks’ removal from SWIFT.
The longer the Russian war in Ukraine persists, the more FinTech companies and crypto will play a significant part in the financial side of the conflict. FinTech companies play a role in enforcing the international financial sanctions levied against wealthy Russians, those close to Putin, and the Russian economy. Cryptocurrency seems poised to have a significant impact on both Russia and Ukraine.
FinTech applications find themselves at the center of the financial sanctions against Russia. With Dogtown Media’s experience with FinTech mobile applications, we deeply understand the impact that the Russian war with Ukraine has on the FinTech industry.Tags: AI app development New York City, AI in finance, Android app developers New York City, banking vs FinTech, fintech app, FinTech app developer, FinTech app developer London, FinTech apps, fintech disruption, fintech mobile apps, hotel association of new york city, IoT app developer New York City, iphone app developer new york city, iPhone app developers New York City, machine learning app developers New York City, medical app developer New York, medical app developer New York City, mobile app developers New York City, mobile app development New York City, New York, new york app development, New York Attorney General Eric Schneiderman, new york city