With financial sanctions imposed on Russia by the European Union, the United States, and other states, there has been worry that people and groups in the country will turn to cryptocurrency to get around the limitations.
The US Treasury Department announced on March 1st that upcoming sanctions on Russia will encompass monitoring on virtual currencies. Large cryptocurrency exchanges were also instructed by the White House to stop conducting transactions with sanctioned companies.
In an executive order set to be announced today, the US government explicitly states it will take measures against any enterprise that violates Russia’s sanctions, not limited to the utilization of cryptocurrencies and other virtual assets for the same purpose.
The executive order contained the following: “all property and interests in property that are in the United States, that hereafter come within the United States, or that are or hereafter come within the possession or control of any United States person of the following persons are blocked and may not be transferred, paid, exported, withdrawn, or otherwise dealt in … deceptive or structured transactions or dealings to circumvent any United States sanctions, including through the use of digital currencies or assets or the use of physical assets.”
Countries around the world have rained down sanctions on Russia since it decided to invade Ukraine on February 24. Certain Russian banks will be removed from the SWIFT, per an agreement struck on Saturday and Sunday, which allows the US to place sanctions on Russia’s central bank and other income streams.
The White House, as per Bloomberg, has requested prominent cryptocurrency exchanges to confirm that their systems cannot be leveraged to avoid sanctions imposed on Russia.
As a consequence, Russians will have restricted access to international funds, stifling economic growth and increasing isolation. The additional sanctions are in retaliation to Russia’s occupation of Ukraine, which led to fighting in Kyiv and its outskirts.
In a tweet last week, the deputy prime minister of Ukraine, Mykhailo Fedorov, urged crypto exchanges to restrict Russian users.
I'm asking all major crypto exchanges to block addresses of Russian users.
It's crucial to freeze not only the addresses linked to Russian and Belarusian politicians, but also to sabotage ordinary users.
— Mykhailo Fedorov (@FedorovMykhailo) February 27, 2022
Though mandated, the cryptocurrency exchange platforms are not entirely in agreement. Binance has stated that it will not simply block the accounts of all Russian users. However, for those users that are subjected to sanctions, Binance will respond in kind by freezing their accounts.
Cryptocurrencies are “meant to provide greater financial freedom for people across the globe,” said a representative of Binance to CNBC, by adding that a full ban would quite literally “fly in the face of the reason why crypto exists.”
Similarly, Coinbase, another well-known exchange, has declined to place a total ban on all Russian accounts but has declared that it will comply with the executive order.
In this regard, Jesse Powell, the CEO of Kraken also said that so long as there is no legal requirement, they cannot freeze the accounts of Russian users.
With Russian inflation anticipated to soar, the Ruble is prone to dropping further, driving Russians to explore alternatives. In the wake of a declining hryvnia and the ban of digital money transactions, residents in Ukraine have been seen utilizing Bitcoin (BTC) and Tether (USDT).
Russia has been a significant backer of cryptocurrencies, with roughly 12% of the worldwide market coming from the country. This has raised suspicions that cryptocurrency may be leveraged to get around the sanctions imposed on Russia.