Big Crypto Exchanges Resist Calls to Freeze All Russian Accounts — So Far

Russians aiming to ease the blow from recent economic sanctions have been pouring money into cryptocurrencies like Bitcoin, even as a senior Ukrainian official called on the platforms that facilitate such trading to freeze all Russian and Belarusian users’ accounts — including those not hit by the sanctions.Ukraine’s vice prime minister and minister of digital transformation, Mykhailo Fedorov, said over the weekend that it is “crucial to freeze not only the addresses linked to Russian and Belarusian politicians, but also to sabotage ordinary users.”In response, two of the biggest cryptocurrency exchanges said: No. The CEO of the Kraken Exchange, Jesse Powell, tweeted that while he understands the rationale for such a move, “we cannot freeze the accounts of our Russian clients without a legal requirement to do so.”He said the exchange’s mission is to “bridge individual humans out of the legacy financial system and bring them in to 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.”Mr. Powell warned, however, that Russians should be aware that such a move may be forthcoming because, despite the libertarian bravado of cryptocurrency advocates, the exchanges would have little choice but to comply should America expand the list of sanctioned individuals, according to Jim Harper, a senior fellow at the American Enterprise Institute at Washington, D.C.Cryptocurrency exchanges “are no different than any other financial service provider with respect to freezing assets,” Mr. Harper said. The Treasury Department “has made it clear that they can deal with crypto wallets, that they can say that no one is allowed to deal with or serve a particular wallet without being in violation of sanctions.”The point was made abundantly clear last week in Canada, where Prime Minister Trudeau invoked the Emergencies Act to lock down some cryptocurrency assets held by truckers protesting Covid vaccines and mandates. Mr. Trudeau ordered every financial institution in the country, including cryptocurrency exchanges, to freeze the truckers’ accounts.Seizing cryptocurrencies like Bitcoin would be exceedingly difficult if not impossible for a government if they are held in individual wallets that are not on any central exchange. What governments can do, however, is restrict a Bitcoin owner’s ability to convert it into a fiat currency like the dollar through financial intermediaries such as exchanges.The ability of a government to confiscate cryptocurrencies also depends on the kind of exchange on which those assets are held. Cryptocurrencies can be held in either centralized exchanges that are regulated and vulnerable to government pressure, or they can be held in decentralized exchanges that are much more difficult, if not impossible, for regulators to control.Over the weekend, U.S. officials ratcheted up the sanctions against Russia imposed because of its invasion of Ukraine. Following action earlier in the week against Russian banks and what were described as “powerful Russian elites,” the Treasury Department along with its European allies issued additional sanctions against Russia’s central bank and sovereign wealth fund on Sunday.Officials at the largest cryptocurrency exchange by volume, Binance, said they would comply with the sanctions against named individuals but not against all Russian users unless legally compelled to do so. “We have assembled a dedicated global compliance task force, including world-renowned sanctions experts, and are taking the steps necessary to ensure we take action against those that have had sanctions levied against them, while minimizing impact to innocent users,” a Binance spokesman said in an email. “Should the international community widen sanctions, we will apply those aggressively as well.”At least one other platform that deals in digital assets, however, said it has already moved against its Russian users. The California-based exchange DMarket, which allows users to trade in video-game items and non-fungible tokens, or NFTs, said in a tweet that it had halted the registration of new accounts from Russia and Belarus and frozen the accounts of users from those countries already on the platform. Dmarket’s co-founders are both Ukrainian.Despite the threats, Russians appear to be rushing to convert their rubles, which lost as much as 25 percent of its value relative to the dollar Monday, into cryptocurrencies.Data published Monday by the Paris-based cryptocurrency research firm Kaiko found that the volume of Russian ruble-denominated transactions in Bitcoin surged to its highest level in months over the weekend.In its weekly research report, Kaiko said more than 3 billion rubles a day were being converted into Bitcoin on the exchanges that trade in the Russian currency. Kaiko said it saw similar volume increases in transactions involving the conversion of rubles into stablecoins, the cryptocurrencies that track U.S. dollars.While some feel movements into Bitcoin could allow Russians to evade the current sanctions, Mr. Harper believes cryptocurrencies will not likely be much of a factor in the current crisis because the dollar amounts of the sanctions being imposed — trillions in some cases — are just too huge when compared with the total volume of cryptocurrencies in existence.That may change, however, he said.“Down the horizon, if you assume that crypto becomes significant enough that transactions are being made off the exchanges without intermediaries, — like internet cash that doesn’t require service providers — then the way sanctions work will have to change,” he said.

Big Crypto Exchanges Resist Calls to Freeze All Russian Accounts — So Far

Big Crypto Exchanges Resist Calls to Freeze All Russian Accounts — So Far

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