One of the many cries for help from Ukraine in recent days came from Mychailo Fedorov, Deputy Prime Minister of Ukraine. He called on major crypto trading platforms to ban all Russians. “It is crucial not only to freeze the (crypto) addresses of Russian and Belarusian politicians, but also to sabotage ordinary users,” he tweeted.
Such voices also came from the United Kingdom. For example, Conservative MP Tom Tugendhat pointed to the risk that sanctioned Russians could continue to trade their assets through cryptocurrencies. Liz Truss, the British Foreign Secretary, said she is looking closely at cryptocurrencies as a possible route to circumvent sanctions against Russian banks, among others.
Cryptocurrencies such as Bitcoin and Tether have been on the rise since the invasion of Ukraine began. An analysis by crypto research firm Chainalysis shows that trade between the Russian ruble and some cryptocurrencies has doubled since the invasion. It concerns trade worth tens of millions of euros per day. Even before the invasion, cryptocurrency trading was popular in both Russia and Ukraine.
cryptobanks
Crypto trading places did not heed the call to block Russians. It is also highly questionable whether they will do so. “A decision unilaterally to ban people from accessing their crypto would go against the very purpose of crypto,” Binance told Bloomberg, for example. This refers to the philosophy behind cryptocurrencies, that of free, alternative trading places averse to government interference. Moreover, according to Binance, it would be “unethical” if Russians can no longer access or trade with their cryptocurrencies.
Jesse Powell, founder of the Kraken exchange, said that in the world of crypto, “random lines on cards no longer matter” and people should not fear “arbitrary confiscation” of their money. Moreover, according to Powell, it is not legal to ban all Russians without a legal basis. Other crypto companies, such as Coinbase, made similar noises.
Also read: Western sanctions set a record low for the Russian ruble and a stir in the international market
How realistic is it that crypto banks will comply with the request from Ukraine? Bert Slagter, author of the book Our money is broken and analyst at Bitcoin Alpha, understands the Ukrainian request, but thinks banning all Russians is a bridge too far. Slagter wonders whether these companies should take measures that go beyond what the government tells them to do. For example, the US government is calling on crypto platforms to take targeted action against Russians on the sanctions list, not against all Russians.
“Analyses show that it is hardly or not at all about oligarchs who quickly secure their billions,” says Slagter. This mainly concerns small transactions. In addition, large platforms stick to banning people from the sanctions lists, says Slagter, just like banks do.
get away safely
The increased trade in rubles, says Slagter, is largely due to “‘ordinary’ Russians looking for a safe haven for their money.” Cryptocurrencies are currently much more stable than the plummeting ruble.
Yet there is a great fear that cryptocurrencies are being misused to evade sanctions. For example, Ross Delston, an American lawyer and former regulator, tells Reuters news agency that not banning Russians undoubtedly undermines sanctions. According to him, cryptos offer “an escape route that otherwise would not have existed”.
Slagter understands the fear, but points out that crypto trading places must adhere to the sanctions list. “Russians who want to secure large sums of money will have to find a route that does not follow the sanctions.”
A version of this article also appeared in NRC on the morning of March 3, 2022
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