Following Russian invasion of Ukraine, American banks, oil companies, and internet service providers are blocking access to their services. Also, the list of other companies doing the same is growing daily.
Cryptocurrency traders, on the other hand, are a rapidly growing industry in Russia. Moreover, it has shown no signs of slowing down.
Crypto exchanges, unlike other financial institutions, have chosen not to suspend service to their Russian customers. Coinbase CEO Brian Armstrong stated last week in a series of tweets that ordinary Russians are using crypto as a lifeline. This was after the ruble’s value plunged as a result of economic sanctions imposed by the United States on Russia. He added that eliminating Coinbase’s Russian trading platform will damage regular Russians, many of whom oppose the conflict.
Cryptos Will not Ban Russian Customers
Days after Russian forces invaded Ukraine, the crypto world thrust into the spotlight. Consequently, investors from all over the world donated millions of dollars in cryptocurrency to the Ukrainian government as a show of support. As a result of economic sanctions, the value of the Russian ruble has dropped. It led Russian investors to switch to bitcoin.
Coinbase joins Kraken, KuCoin, Coinberry, and other cryptocurrency exchanges in stating that Russian customers will not be barred from using their platforms. Blocking ordinary citizens, the platforms argue, goes against their crypto-is-not-tied-to-a-government appeal.
Binance said in a statement last month that crypto means providing greater financial freedom for people all over the world. Also, banning people’s access to their crypto on a whim would be contrary to the reason why crypto exists.
Can Russia Avoid Sanctions Using Crypto?
Armstrong’s remarks came as US members of Congress expressed concern that the Russian government would use cryptocurrency to evade economic sanctions imposed on a number of Russian financial institutions. This includes the Central Bank.
However, according to Yesha Yadav, a Vanderbilt University law professor and expert in financial technology regulation, Russia is unlikely to use crypto to evade sanctions. The Russian economy is too big. Also, the blockchain isn’t efficient enough to transfer rubles into cryptocurrency on a large enough scale to keep the economy afloat.
According to Yadav, the US government has not ordered cryptocurrency companies in the US to block their Russian customers. The current US Treasury directive does not require crypto exchanges to block all Russian IP addresses. She believes that will change in the coming weeks. Now that the US Justice Department has formed a task force to look into possible crypto trading restrictions with Russia.
Blocking of Sanctioned Russians
While ordinary citizens fromw Russia will continue to have access to Coinbase, Binance, and other exchanges, those companies announced that their trading activity will freeze for any Russian national placed on the US sanctions list. This includes Russian oligarchs.
On the other hand, we don’t believe that Russian oligarchs will use crypto to avoid sanctions,” Armstrong stated on Twitter. Attempting to smuggle huge sums of money through the use of cash, art, gold, or other assets would be more difficult to conceal in the open ledger of a cryptocurrency.
A spokesperson for Coinbase confirmed the blocking of sanctioned Russians. But would not say who or how many people on the sanctions list have Coinbase accounts. Binance CEO Changpeng Zhao said in a blog post on Friday that the Singapore-based company kicked one sanctioned person off its platform. However, they did not reveal the identity.
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