Crypto’s humanitarian sales pitch in Turkey and Syria

Hello and welcome to the latest edition of the FT’s Cryptofinance newsletter. This week, we’re asking whether crypto donations really make a difference in times of crisis.

After the devastating earthquake that hit Turkey and Syria at the start of this week, the crypto industry has tried to do its part by rounding up millions in donated tokens.

Blockchain records show wallet addresses shared by AHBAP, a local non-profit, have received more than $3mn in donations this week. Blockchain analytics firm Chainalysis estimates that more than $5mn in crypto donations have been sent to Turkey and Syria.

“Many people around the world want to help with cryptocurrency,” AHBAP founder and local artist Haluk Levent wrote on Twitter.

Chainalysis rival Elliptic has also been crunching donation numbers, finding more than $10mn worth of crypto tokens pledged by a host of crypto firms, most notably Binance which has promised a total of $5mn in donated funds.

In many ways, Turkey’s economic strife even before the earthquake means the country is tailor-made to embrace crypto. An era of soaring prices and falling interest rates plays into the hands of crypto evangelists who claim digital assets such as bitcoin are a store of wealth and a hedge against inflation.

“If you ask people, they are so eager on crypto,” one Ankara local named Tolga told me. The FT’s new Turkey correspondent — and my old boss — Adam Samson spotted a coin store in his first week in Ankara.

For an industry scarred by scandal, it’s a great sales pitch to paint crypto as the go-to tool for financial relief in times of crisis. But is it true?

“You can’t use crypto in daily life,” Tolga explained, adding that locals need to convert their crypto to the Turkish lira and withdraw newly converted fiat to their bank account. Hardly the type of financial gymnastics needed in the aftermath of a natural disaster.

Another local — who I’ll refrain from naming but who traded cryptocurrencies before the earthquake — has struggled since the disaster to release funds from a popular exchange. “I am really sad, I have nothing left to do but wait for [the exchange to help],” they told me via Twitter.

“Some of our friends are under the rubble . . . we can’t hold back our tears.”

The intent on behalf of crypto’s advocates may be admirable, but the simple fact is where crypto succeeds in enabling near-real-time transactions, it fails in real-world utility.

“If the goal is to get grandma money quickly and simply, there is a strong economic argument that a countertrade swap through a crypto asset isn’t going to be any cheaper than traditional mechanisms,” software engineer and crypto critic Stephen Diehl told me via text. “Ultimately, the recipient doesn’t have much use for bitcoin because they can’t spend it.”

That’s not to say crypto can’t serve a humanitarian purpose. I’d be remiss not to point out that more than $50mn worth of crypto tokens were donated to Ukraine’s war effort in the aftermath of Russia’s full-scale invasion last year.

Weeks after the invasion, Ukraine’s deputy minister for digital transformation Alex Bornyakov said crypto was “extremely helpful” when it came to sending vital supplies to armed forces. “Each and every helmet and vest bought via crypto donations is currently saving Ukrainian lives,” he said.

That may be true, but before Christmas Bornyakov also told me that Russian use of crypto to evade sanctions was set to become a “huge issue”. So there are always two sides to the coin in crypto land.

What’s your take on crypto’s utility in times of crisis? Let me know at scott.chipolina@ft.com

Weekly highlights

• Another week, another crypto platform bites the dust. LocalBitcoins, one of the world’s oldest crypto exchanges, announced it will discontinue its service after 10-plus years of activity. The company blamed the “ongoing very cold crypto-winter” for its closure and apologised to users for “any inconvenience this may cause”.

• The bad news for crypto exchanges continues: late on Thursday Kraken ended its staking programme for US customers and paid $30mn in a settlement with the US Securities and Exchange Commission. The settlement is the latest in a number of enforcement actions targeting actors the SEC says violated securities rules. Check out my story with Stefania Palma here.

• My colleague Joshua Oliver published a fascinating FT Magazine piece on the final hours of FTX, written during his recent trip to New York. Check it out here.

• Former Coinbase employee Ishan Wahi pleaded guilty to two counts of conspiracy to commit wire fraud. You may recall the 32-year-old’s case from July last year, when the former product manager was charged with sharing tips on tokens due to be listed on Coinbase. “Wahi is the first insider to admit guilt in an insider trading case involving the cryptocurrency markets,” said US attorney Damian Williams.

• Days before cracking down on Kraken, the SEC laid out its priority for the year ahead. Among other areas, the regulator pointed to emerging technologies and crypto assets as one sector that may pose risks to investors or financial markets. That much is obvious to anyone who has followed crypto for more than a day, but if you thought the SEC was tough on this industry in 2022, my advice would be to buckle up.

Soundbite of the week: ‘Shameless’ crypto founder

Three Arrows Capital co-founders Su Zhu and Kyle Davies oversaw one of the highest-profile crypto collapses of 2022 not named FTX.

Earlier this year both men announced a new exchange, named GTX. The idea behind GTX is to offer impatient folks the chance to trade bankruptcy claims before the slow wheels of justice settle claims for themselves. No, I’m not kidding.

Three Arrows’ liquidators, who have long complained about the co-founders’ lack of willingness to engage in the bankruptcy process, slammed Davies for his newest project.

“Since January 5, 2023, Mr Davies has been active on social media, having ‘tweeted’ or ‘retweeted’ dozens of times . . . Shamelessly, while ducking his obligations to his failed company, Mr Davies has been recently active in an effort to raise tens of millions to start a new crypto exchange.”

Data mining: A word on darknet market share

If you follow the ever-evolving nexus of cryptocurrency and crime, you will recognise Hydra Market — at its height the largest darknet market in the world.

Earlier this year the US Department of Justice took action against the founder of Bitzlato, a little-known crypto exchange that allegedly acted as a conduit for laundered money. Its largest trading counterparty, Hydra Market, was shut down in April last year.

Fresh data shared by Chainalysis shows that despite having only a third of the year to play with, Hydra crushed the competition.

Cryptofinance is edited by Philip Stafford. Please send any thoughts and feedback to cryptofinance@ft.com.

Your comments are welcome