Russian authorities have threatened to freeze the accounts of all Russian users who possess crypto assets worth more than EUR10,000. But Zhao told Bloomberg that further restrictions would be unethical. He said that the company complied with international government mandates and sanctions against sanctioned individuals. However, he added that the company has no plans to freeze all Russian users' accounts. Despite the threats, Zhao's statement has raised questions among some users.
Russian nationals or legal entities with crypto assets worth more than EUR10,000
In line with the EU sanctions against Moscow, the world's largest cryptocurrency exchange, Binance, has capped the value of Russian accounts with crypto assets at EUR10,000 or higher. This means that only accounts with more than that value can withdraw funds. The company said that it's not ethical to block Russians altogether. However, there are some exceptions, which you should be aware of.
In order to comply with EU sanctions, the exchange has adopted measures to restrict the use of its platform by Russian nationals and legal entities. These measures are in response to the growing number of requests to block Russian users. However, Binance has rejected calls from Ukraine to ban Russian users and has pledged to contribute $10 million to humanitarian causes in the country. In an interview with Bloomberg, Binance CEO Alexei Kudrin said that the decision to block Russian users was a "mistake" and "we'll take a different approach."
According to reports, the move comes on the heels of the fifth wave of EU sanctions against Russia. The latest wave of sanctions has targeted Russian citizens and legal entities that have crypto assets worth more than EUR10,000. This action aims to combat these issues by making it more difficult for Russians to access and use cryptocurrency. This is an unfortunate consequence of sanctions, but the exchange remains committed to following the laws of its host countries.
Russia is currently experiencing a crisis of unprecedented proportions. As the ruble stabilizes and the dollar falls, crypto trading volume has fallen. Ruble-denominated crypto trading has decreased by half from its peak on March 7. While the ruble may have fallen significantly since then, it remains a crucial means of survival for many Russians who have fled the country.
According to Hayter, the Russian government has a "love-hate relationship" with digital assets. While the central bank of Russia is working to ban cryptocurrencies, President Vladimir Putin has been pushing for regulations and bans on their use. While the company has taken steps to combat these issues, they are unable to block the use of hashflags by Russian nationals or legal entities.
While western governments are trying to stop the Russian people from accessing their cryptocurrency, this is a completely unrealistic scenario. While the country does have a limited amount of crypto exposure, that does not mean it's too big of a problem for the world's population. Most crypto owners have small amounts of their net worth in crypto assets, which translates to a very low percentage of total wealth. Russia is no exception.
Russian banks' cardholders will face sanctions
Russian banks' cardholders will no longer be able to use the cryptocurrency exchange's services. Binance, the world's biggest cryptocurrency exchange, is restricting access to individuals and banks sanctioned by the Russian government. However, some of the world's biggest crypto exchanges aren't going to follow the lead of the EU and remain in Russia. They say that the decision will weaken the country's isolationist efforts.
As a result, a number of key Russian banks are being disconnected from the SWIFT payment system. The leaders of the EU, Great Britain, Canada, Germany, Italy, and France reportedly agreed to the decision. This move will affect the cardholders of these banks and will make them unable to make purchases outside of Russia or at foreign online stores. In particular, these sanctions affect Otkritie, VTB, and Promsvyazbank.
Moreover, the sanctions will restrict Russian residents' access to cryptocurrencies. Besides, the Russian central bank is not allowed to intervene in the currency market. As a result, more than 50% of its reserves will be blocked. However, this ban will help preserve the liquidity of the country's domestic banks. Meanwhile, partial restrictions on withdrawals will help preserve liquidity for corporate settlements within the country.
Russia has a huge GDP. The ruble will weaken if Russia bans crypto, as the latter devalues the currency. As a result, sanctions on a few international crypto exchanges won't have a major impact. As a result, the economy of Russia is $1.5 trillion, making sanctions on a handful of global exchanges irrelevant. This is because tens of thousands of small exchanges exist in the world, including some in Russia. Also, switching costs between exchanges are low and liquidity is instantaneous. The arbitrage traders and liquidity providers will provide liquidity as soon as they receive the order.
As a result of the sanctions, the EU has closed some loopholes for the Russian government to move money. While some cryptocurrency exchanges have chosen to do the opposite, others have responded with similar responses. While the EU and U.S. imposed sanctions targeting Russia and its state-owned banks, Russian crypto exchanges have resisted the calls. Binance CEO Alexey Minchkov said in March that sanctions should not be encouraged by the retaliation against the Ukrainian government.
The ruble is already weak against the US dollar and other major currencies. The Russian central bank has already increased the interest rate from 9.5% to 20% and imposed a requirement for exporters to sell 80% of their foreign exchange earnings. The black market exchange rate is 150 to 170 rubles per US dollar. In the meantime, the Russian financial system is heading towards a major breakdown.
Binance says it will not "unilaterally" freeze accounts of all Russian users
After a recent escalation in the war between Russia and the United States, a spokesperson for Binance has clarified that the exchange won't unilaterally freeze accounts of all Russian users. However, the company has restricted its services for a handful of major Russian clients. This is not surprising as Binance's trading volumes in Russia have skyrocketed over the last few months as Russians have resorted to crypto as a way to protect their assets from devaluation and sanctions. Nevertheless, Kostarev told CNBC that the company's top priority was to keep the Russian market open.
A recent report by CoinDesk suggests that Binance is not the only major crypto exchange that has resisted Russian government actions. It has echoed the position of another crypto exchange, Kraken, which halted trading of its services for two years because of sanctions imposed by the US government. While the ban has hurt the crypto market as a whole, it has not hindered the growth of other exchanges, including Binance.
Furthermore, Binance has never actively assisted the Russian government in the investigation of Alexi Navalny, the author of the infamous article. The prosecution case against Navalny noted that there was no connection between the donations made by Navalny and digital currencies. It is also worth noting that the Reuters news agency, which has been regarded as a trustworthy source for years, published a false article that is inaccurate.
The European Union has imposed sanctions on Russia since the war escalated and is closing loopholes to prevent a Russian money laundering operation. On April 8, the European Union (EU) notified cryptocurrency exchanges, banks, and currencies of their actions against Russian users. These sanctions were imposed on the first two, but a few months later, Binance said it won't "unilaterally" freeze the accounts of all Russian users.
While sanctions may have impacted many aspects of the crypto industry, Binance has stayed consistent with its compliance with the rules and has a dedicated global compliance task force. This group includes world-class experts that enforce the company's rules. Ultimately, this means that the company will continue to be ahead of the curve in implementing sanctions, regardless of the escalation in the Russian economy.
A spokesperson for Binance told CNBC that the company will not follow Fedorov's request to freeze all Russian user accounts, stating that doing so would be counter-productive and would harm civilians. Further, freezing accounts of innocent users would be "contrary to the purpose of the crypto industry."
Binance's decision not to freeze Russian user accounts demonstrates that the crypto industry is not the target of sanctions. However, the European Union and the United States have both taken steps to implement sanctions against Russian individuals. The European Union has already imposed sanctions against Russian banks and sovereign debt. While it's unclear if Russia will ever turn to blockchain for the sake of escaping these sanctions, this news is encouraging.