Crypto Exchanges Won’t Stop Russians, Raising Fears of Sneaky Sanctions

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LONDON — Some of the world’s largest cryptocurrency exchanges remain in place in Russia, breaking ranks with traditional finance in a move that experts say weakens Western attempts to isolate Moscow after the invasion of the Ukraine.

Western sanctions, which are aimed at squeezing the Russian economy and separating it from the global financial system, have forced businesses and financial firms en masse to suspend their activities in the country.

But many of the world’s largest crypto exchanges – including US-based Binance and Kraken and Coinbase – have halted a blanket ban on Russian customers, despite the Ukrainian government’s call for it. They said they would screen users and block anyone with sanctions.


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The standoff illustrates the ideological divide between the traditional financial sector and the world of cryptocurrencies, whose roots lie in libertarian ideals and distrust of governments.

Crypto exchanges have argued that shutting down an entire nation would go against Bitcoin’s philosophy of providing access to payments without government oversight.

Still, some anti-money laundering experts have warned that the exchanges could leave an open avenue for Russians to move money overseas, undermining Western efforts to pressure Russia to she withdraws from the war.

“There’s no question the penalties are being reduced,” said Ross Delston, a US attorney and former banking regulator, adding that cryptocurrencies “allow a pathway for a flight to safety that otherwise wouldn’t have existed.”

While most exchanges require identity verifications, the stringency of “know your customer” rules differs by industry, worrying regulators who view crypto as a vehicle for illicit money.

Anti-money laundering and crypto experts have said those targeted by the sanctions could try to move funds through so-called privacy coins – a class of cryptocurrency that obscures identity users more than bitcoin. Proponents say they offer users greater protection against intrusive government surveillance.


Russian households and businesses rushed to convert rubles into foreign currency as the ruble hit a record high of 110 against the dollar on Wednesday.[[


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There are also signs suggesting people are scrambling to secretly save on crypto – trading volumes between the ruble and cryptocurrencies reached 15.3 billion rubles ($140.7 million) on Monday, a tripling from the previous week, according to researcher CryptoCompare.

The spike has worried regulators, with the European Commission examining whether crypto is being used to circumvent sanctions, an EU official said on Wednesday.

The US Treasury and Britain’s financial watchdog did not respond to requests for comment on this story.

The position of the crypto exchanges runs counter to that of several traditional payment companies and fintech companies that have reacted to the sanctions by restricting services in Russia.

Payments company Wise and money transfer processor Remitly have, for example, suspended money transfer services in Russia, while Apple Inc has restricted the use of Apple Pay.

US payment card giants Visa Inc and Mastercard Inc have also blocked several Russian financial companies from their networks.


Ukrainian Deputy Prime Minister Mykhailo Fedorov on Sunday asked crypto exchanges to block Russian users’ digital wallet addresses, a move that would effectively eliminate their ability to trade crypto.

Kraken CEO Jesse Powell said he wouldn’t accept calling bitcoin an “embodiment of libertarian values.”


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Blocking users from an entire country “doesn’t necessarily punish those who are actually responsible and who may have already prepared for the possibility of blanket sanctions,” a Kraken spokesperson said.

Kraken complies with the legal and regulatory requirements of all jurisdictions where it operates, they added.

Binance, the world’s largest crypto exchange, also refused to ban all Russian users, but said it was blocking the accounts of all sanctioned customers. “Crypto was supposed to provide greater financial freedom for people around the world,” he said on Monday.

Binance accounts for more than 40% of all ruble crypto exchanges, CryptoCompare said. A Binance spokesperson declined to comment on the figure or give details of the sanctioned users it blocked.

US cryptocurrency exchange Coinbase Global Inc also said it would not impose a general ban on transactions involving Russians, although it would block the accounts of those targeted by the sanctions.

Still, continuing to operate in Russia likely poses risks for the exchanges themselves, warned Joby Carpenter, a crypto and illicit finance specialist at the Association of Certified Anti-Money Laundering Specialists.

“Exchanges and ultimately banks where cryptoassets exit will need to be mindful of these efforts to avoid breaching sanctions or terrorism legislation,” Carpenter said.

($1 = 108.7200 rubles) (Reporting by Tom Wilson; Editing by Sujata Rao and Pravin Char)


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Crypto Exchanges Won’t Stop Russians, Raising Fears of Sneaky Sanctions

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