Cryptocurrency exchanges have rejected calls from Ukraine and its allies in the West to ban transactions in Russia, with some stating that while they will comply with curbs on individuals convicted of serious offenses, the bans “fly in the face of the reason why crypto exists.”
Crypto exchanges are facing immense pressure to block transactions originating in Russia, as Western politicians and media entities stir up concerns that cryptocurrencies will provide a financial backdoor for Russians to continue doing business around the world.
Calls to ban Russians from participating in cryptocurrency come amid efforts to lock Russia out of the global financial system through the imposition of sanctions and suspensions from monetary bodies and services. SWIFT moved to remove some Russian banks from its network, Rebel News reported.
Western sanctions are imposing a heavy toll on the daily lives of average Russian citizens.
According to the Financial Times, trading between the Russian ruble and Tether have doubled since the initial invasion of Ukraine, peaking at $60 million a day on Monday, according to crypto research group Chainalysis.
The movement of funds would suggest that Russian crypto owners who are restricted from traditional financial systems due to sanctions are keeping their money in crypto or transferring it overseas.
Ukraine’s Vice Prime Minister Mykhailo Fedorov placed the call Sunday to “all major crypto exchanges to block addresses of Russian users,” stating it is, “crucial to freeze not only the addresses linked to Russian and Belarusian politicians, but also to sabotage ordinary users.”
In separate calls on Twitter, Fedorov urged video game publishers to ban Russian gamers from participating in their gaming services online.
Major exchanges said they will comply with restrictions and sanctions imposed by Western governments on Russian oligarchs and politicians. However, they are pushing back on any Russia-wide bans.
“To unilaterally decide to ban people’s access to their crypto would fly in the face of the reason why crypto exists,” said Cayman Islands-registered Binance, one of the world’s biggest crypto exchanges. Rival OKX, based in the Seychelles, also said it had no plans to bar Russian accounts in bulk.
Western powers have expressed concern about crypto being used to evade sanctions. A White House official said the Biden administration was “continuing to aggressively combat the misuse of cryptocurrency, including to evade US sanctions”.
But for some crypto market operators, a ban would mark a profound break from early pioneers who conceived the idea of the blockchain precisely to circumvent the global banking system.
Jesse Powell, founder of the exchange Kraken, said his company’s mission was to “bridge individual humans out of the legacy financial system and bring them into the world of crypto, where arbitrary lines on maps no longer matter, where they don’t have to worry about being caught in broad, indiscriminate wealth confiscation”. Kraken “cannot freeze the accounts of our Russian clients without a legal requirement to do so”, he added.
“Bitcoin is the embodiment of libertarian values, which strongly favour individualism and human rights.”
The United Kingdom’s Foreign Secretary, Liz Truss, said that the British government is looking at cryptocurrency as a channel in which Russian entities could undermine the sanctions imposed upon them.