Sunday, July 12, 2020

Russia’s Use Of Cryptocurrency For Hybrid Wars and Indecision On Crypto Adoption

Myrotvorets, a controversial independent Ukrainian website that claims to track persons threatening Ukraine’s security, reveals in a blog post how Russia is using cryptocurrency for hybrid wars. The site calls on the authorities in Kyiv to investigate Russia’s alleged use of cryptocurrencies through WEX digital currency exchange platform to fund subversive activities potentially in support of one of the candidates in Ukraine’s presidential runoff election, scheduled for April 21.

Crypto and Hybrid War

Myrotvorets revealed the top personalities that are allegedly being used as agents of Russia hybrid war through WEX exchange. The first in the list is Andrey Pinchuk, who served as the initial “minister of state security” of the Moscow-backed self-declared Donetsk People’s Republic (DPR), from July 2014 through February 2015, and is one of the founders of the Donbas Volunteers. Though he claims to have retired from the Russian Federal Security Service (FSB), Myrotvorets refers to him as an “undercover FSB officer.”

Also, the second person of interest is the alleged beneficiary owner of the WEX crypto exchange, Dmytro Khavchenko (a.k.a. Moryachok). He purchased the once highly popular crypto exchange BTC-e in the second half of 2018, in his daughter’s name, and subsequently renamed this exchange WEX to avoid sanctions.

A year ago the US federal bureau of investigation seized BTC-e servers in a case related to cybercrime and money laundering. Reportedly, the notorious hacker group Fancy Bear, believed to be linked to Russian military intelligence had also been using this exchange.

Also, it was reported that the Khavchenko’s deal to buy the WEX digital currency exchange was sponsored by Russian oligarch and “DPR and LPR supporter” Konstantin Malofeyev, both Malofeyev and Khavchenko have publicly denied the former’s interest in WEX. Khavchenko had once declared that his interest in crypto stems from the desire to weaken the global influence of the US dollar.

Meanwhile, the Security Service of Ukraine (SSU) has long been preoccupied with tracking crypto payments to “unidentified representatives of the DPR and LPR.” Also, the SSU through its operations has discovered the generated funds were being used to buy materiel and finance military and information operations.

Lastly, in addition to the schemes, there has been an idea to create a “national cryptocurrency” for the Russian Federation as a means to help shield the country from Western sanctions. One of the foremost proponents of this suggestion was Kremlin adviser and economist Sergey Glazyev, whom Kyiv has accused of helping to manage 2014 Russian “hybrid” aggression against Ukraine.

Russia’s Double Standard On Crypto

While Russia has been adopting cryptocurrency for its hybrid war, it has been handled with caution in Russia because of its fear of use in criminal activities such as money laundering, illegal drug flows, and terrorism financing.

Though Russia awaits its crypto regulation by July, Russian Central Bank representatives speculated two years ago that they might consider shutting down all domestic crypto exchanges and restrict access to online foreign-domiciled exchanges.

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