One of the first punitive measures taken against Russia in response to the military invasion of Ukraine was the implementation of economic sanctions aimed at isolating the country from the international financial system. On March 12, Russian banks lost access to the SWIFT international payment and messaging network, and private sector payment companies, such as Visa, PayPal and Mastercard, followed closely behind. But as these highly regulated and publicly monitored organizations quickly responded to the crisis, concerns quickly mounted that the Russian state, and the corporations and oligarchs associated with it, could turn to digital currency exchanges like a back door to circumvent the sanctions.
In the UK, the Bank of England and the Financial Conduct Authority have called on crypto firms to enforce sanctions on their platforms, and central banks and regulators around the world have since joined this chorus of concern. More recently, Japan announced that it would revise its foreign exchange and foreign trade law. This is intended to broaden its scope to apply to crypto assets, which means exchanges will have to assess whether their clients are targets of Russian sanctions.
And yet, some of the best-known crypto exchanges are still dragging their feet, reluctant to toe the line drawn by global policymakers and regulators. Binance, the world’s largest exchange, as well as Coinbase and Kraken, all showed empathy for the plight of Ukrainians, and some froze accounts linked to sanctioned individuals, but they all stopped withdrawing from Russia or block all the money. enters and leaves the country.
Related: Every Bitcoin Helps: Crypto-Powered Relief Aid for Ukraine
As CEO of Poland’s largest cryptocurrency exchange, I understand the moral dilemma they face, torn between free market ideals and a sense of moral duty, but as this devastating human tragedy unfolds in Europe East, we as an industry must do more to condemn violence by accessing our platforms. At Zonda, we did not make the decision to withdraw from Russia lightly, but we did so quickly, and in doing so we voted for peace, transparency and respect for the spirit of global regulation. Failure to do so will be seen by many around the world as indifference at best or active support at worst.
Cryptocurrency exchanges are at a moral crossroads
The conflict in Ukraine exposed a tension at the ideological heart of cryptocurrency. Digital currencies were first imagined with the aim of creating a decentralized global financial system, free from financial tinkering by governments, central banks and large financial services companies. And yes, there are many reasons why decentralization is something we should explore, including seeking greater transparency, accountability, and security. But we can’t let this quest for the purest form of financial independence lead us down a dark path, one where we think the laws of the land – moral or otherwise – don’t apply to us. Ideological support for decentralization can never justify the conscious facilitation of criminal activity.
As an industry, we should ask ourselves what kind of world we want to create and let our morality guide our actions. Russia’s invasion of Ukraine is an undeniable violation of international law and the indiscriminate targeting of Ukrainian civilians, in places like Mariupol, is not an ethical gray area.
Related: “I’ve never paid with crypto before”: how digital assets make a difference in times of war
The risk of further marginalization
The current crisis calls for a united collaborative response from all corners of every industry and provides a rare window for the global crypto industry to pull together and take unified action. The crypto asset industry should do more to demonstrate that it takes the activity that takes place under its roof seriously. This could include freezing the accounts of Russian and Belarusian users and rejecting requests for new accounts from consumers in those regions. In fact, I believe this is the best chance we have of shaking off some of the criminal overtones that continue to plague our industry.
The price of Bitcoin (BTC) has skyrocketed over the past couple of years, and a major driver of that has been greater integration with the broader financial services industry. Not reading the piece on this crisis risks undermining the trust the crypto industry has built over the past few years with regulators, policymakers, and consumers. She would signal to these actors that she sees herself totally removed from their missions, even from the real world.
There are of course business factors at play here as well. Companies that demonstrate a shared sense of purpose and moral worth to their customers enjoy 14.1% higher revenue growth and 34.7% higher annualized total shareholder return. The crypto sector is no exception, and as war rages on in Ukraine, those who did not act quickly to support the victims will be remembered.
Related: Crypto Offers Russia No Way Out of Western Sanctions
Could regulation be the solution?
The Financial Stability Board announced in February that it would develop a global regulatory framework for crypto assets, the first major step in consistent international guidelines. At the same time, the United States Securities and Exchange Committee launched an Alternative Trading Systems Regulatory Plan, which would allow regulators to investigate crypto platforms and even decentralized finance protocols.
As things stand, there is no indication that these regulations will impose economic sanctions measures, but they will introduce new checks and balances that will bring greater transparency to money flowing through digital asset exchanges and deter more illicit activities. But it’s no secret that regulators are catching up with the rapid pace of innovation in crypto, and we shouldn’t wait for them to catch up to do the right thing. It is up to us to carry the torch of the reputation of the industry that we all love.
This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision.
The views, thoughts and opinions expressed herein are those of the author alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.
Kral of Przemyslaw is the CEO of Zonda (formerly BitBay) and sits on its board of directors. Previously, Przemysław was BitBay’s Chief Legal Officer. He played a key role in the strategic business development of Zonda, including its regulatory approval in Canada and Estonia. Przemysław has over 20 years of experience in the legal field and is a member of the Foreign Lawyers Association of the British Bar Council.
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