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Uncle Sam Turns to Crypto Exchanges to Impede Russian Sanction Evaders

By:
Martin Young
Updated: Mar 1, 2022, 12:26 GMT+00:00

The United States Treasury Department and the White House are seeking to bolster financial restrictions which may give them the perfect excuse to crack down on crypto.

Uncle Sam Turns to Crypto Exchanges to Impede Russian Sanction Evaders

Key Insights:

  • The White House wants crypto exchanges to block sanctioned individuals.
  • Binance, Coinbase, Kraken, and KuCoin refuse to blanket ban Russians.
  • Crypto markets rebound 12% adding $225 billion to the total market cap.

The U.S. government has asked cryptocurrency exchanges to ensure Russian organizations and individuals are not using digital assets to circumnavigate sanctions imposed on them.

According to a March 1 Bloomberg report citing “people with direct knowledge of the matter,” the White House’s National Security Council and the Treasury Department have turned to crypto trading platforms for assistance in the financial blockade.

The Biden administration has stepped up its efforts to regulate the usage of digital assets and this latest push may give them the reason they’ve been looking for to impose further restrictions.

Industry analyst Alex Krüger commented that it would be “dreadfully bearish” if Russia adopted crypto to evade sanctions stating “US regulators would be pushed to crush the industry as a matter of national security,”

Major Exchanges Refuse Blanket Ban

Citing a White House official, the report added that cryptocurrencies “aren’t a substitute for the heavily used U.S. dollar in Russia,” but authorities are aggressively continuing to fight any misuse of digital assets.

U.S. authorities have specifically urged Binance, Coinbase, and FTX to take a targeted approach and focus only on those that have been sanctioned, which many appear to be doing.

Binance, which is beyond jurisdiction aside from its smaller U.S. exchange, has refused to block Russian users but said it will take action to identify accounts of sanctioned individuals. In a statement, the firm said, “We are not going to unilaterally freeze millions of innocent users’ accounts. Crypto is meant to provide greater financial freedom for people across the globe.”

Coinbase stated that it is only blocking transactions to or from prohibited addresses identified by Treasury’s Office of Foreign Assets Control. In a similar move to Binance, it will only target sanctioned individuals or organizations.

Kraken CEO, Jesse Powell, echoed the sentiment on Monday stating that the exchange “cannot freeze the accounts of our Russian clients without a legal requirement to do so.”

Johnny Lyu, CEO of KuCoin, also refused a blanket ban stating that “as a neutral platform, we will not freeze the accounts of any users from any country without a legal requirement.”

According to CoinDesk, Ukraine’s Ministry of Digital Transformation is sending official letters to eight cryptocurrency exchanges asking them to block Russian users. The ministry is reaching out to Coinbase, Binance, Huobi, KuCoin, Bybit, Gate.io, Whitebit, and Ukrainian exchange Kuna.

Russia Unlikely to Turn to Crypto

There is not enough liquidity in crypto markets for a country as large as Russia to harness as an alternative to fiat. Therefore, it is unlikely that Russia will fully adopt digital assets to avoid sanctions according to some industry observers.

Either way, markets have rebounded strongly during the Tuesday morning Asian trading session with a 12%, or $225 billion, surge in total market capitalization over the past 24 hours.

About the Author

Martin has been covering the latest developments in the blockchain and digital asset industry since 2017 when he made his first investment. He has previous trading experience and has worked extensively in IT over the past 2 decades.

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