Cryptocurrency companies resist pressure to close Russian accounts

US banks, oil companies and Internet service providers are cutting off Russia’s access to its services after its invasion of Ukrainei the list of other companies that do the same is growing daily. But a fast-growing industry has so far declined to retreat to Russia: cryptocurrency traders.

Unlike other financial institutions, cryptocurrencies have so far opted not to suspend service to their customers in Russia. Brian Armstrong, CEO of Coinbase, said in a series of tweets last week that “ordinary Russians are using cryptography as a lifeline” after the the value of the ruble plummeted as a result of US-imposed economic sanctions on Russia. Closing Coinbase’s trading platform in Russia would hurt ordinary Russians, many of whom do not support the war, he said.

“We are not precautionarily banning all Russians from using Coinbase,” Armstrong tweeted. “We believe that everyone deserves access to basic financial services unless the law says otherwise.”

The cryptographic world came to the forefront of the world days later Russian forces invaded Ukraine, as investors around the world donated millions of dollars in cryptocurrency to the Ukrainian government in a show of support. Russian investors, meanwhile, are abandon the ruble and convert it to bitcoin after a dive in the The value of the Russian currency as economic sanctions tighten.

Coinbase joins Kraken, KuCoin and Coinberry and other cryptocurrencies that have said they will not block Russian customers from using their platforms. Platforms argue that blocking ordinary citizens is contrary to their crypto-calling is not linked to a government.

“Crypto is designed to provide greater financial freedom for people around the world,” Binance said in a statement last month. “Deciding to unilaterally ban people’s access to their cryptography would be contrary to the reason why cryptography exists.”

Can Russia use crypto to avoid sanctions?

Armstrong’s comments came as U.S. lawmakers expressed concern that the Russian government would use the cryptocurrency to evade economic sanctions on a a lot of Russian financial institutionsincluding its Central Bank.

But Russia is unlikely to be able to use cryptography to evade sanctions, said Yesha Yadav, a law professor at Vanderbilt University and an expert in financial technology regulation. Russia’s economy is too big and there is not enough efficiency in the blockchain (the technology platform for digital currencies) to convert rubles into cryptocurrency on a scale large enough to prop up the economy, Yadav told CBS MoneyWatch .

The U.S. government has not ordered U.S. crypto companies to block their Russian customers, Yadav noted that the current U.S. Treasury directive does not require cryptocurrencies to block all Russian IP addresses. But that could change in the coming weeks, now that the U.S. Department of Justice has set up a working group that will explore possible restrictions on trade in cryptocurrencies with Russia, he said.

While ordinary Russian citizens will continue to have access to Coinbase, Binance and others, these exchanges also said they would freeze the business of any Russian citizen that the United States includes on its sanctions list. including the Russian oligarchs.

“That being said, we do not believe that there is a high risk that Russian oligarchs will use crypto to avoid sanctions,” Armstrong tweeted. “Because it’s an open ledger, trying to make a lot of money using cryptography would be more traceable than using cash, art, gold, or other U.S. dollar assets.”

A Coinbase spokesman confirmed to CBS MoneyWatch that sanctioned Russians would be blocked, but declined to 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 has expelled a sanctioned person from its platform, whose identity was not revealed.

In:
• Ukraine
• cryptocurrency
• Russia