# Analysis-Crypto exchanges won’t bar Russians, raising fears of sanctions backdoor Author: Pal Sinha, Barnali Author URL: https://financedigest.com/author/pal-sinha-barnali Published: 2022-03-03 Category: FINANCE Category URL: https://financedigest.com/category/finance Meta Title: Crypto Exchanges Defy Sanctions in Russia Meta Description: Some major crypto exchanges like Binance, Kraken, and Coinbase are defying Western pressure by not banning Russian clients, risking scrutiny over anti-money URL: https://financedigest.com/analysis-crypto-exchanges-wont-bar-russians-raising-fears-of-sanctions-backdoorhtml ![undefined](https://prod.superblogcdn.com/site_cuid_cm5qst7v3003gwirgwqtxn8i8/images/2022-03-02t145701z3lynxmpei210smrtroptp4ukraine-crisis-crypto-exchanges-1736816044964-compressed.jpg) By Tom Wilson LONDON (Reuters) – Some of the world’s biggest cryptocurrency exchanges are staying put in Russia, breaking ranks with mainstream finance in a decision that experts say weakens Western attempts to isolate Moscow following the invasion of Ukraine. Western sanctions, which aim to squeeze Russia’s economy and sever it from the global financial system, have forced companies and financial firms in their droves to halt business in the country. But many of the world’s largest [crypto exchanges](https://www.financedigest.com/exclusive-binance-moved-346-million-for-seized-crypto-exchange-bitzlato-data-show.html "Exclusive-Binance moved 6 million for seized crypto exchange Bitzlato, data show") – including Binance and U.S.-based Kraken and Coinbase – have stopped short of a blanket [ban on Russian](https://www.financedigest.com/oil-jumps-4-as-eu-proposes-ban-on-russian-oil.html "Oil jumps 4% as EU proposes ban on Russian oil") clients, despite a plea from the Ukrainian government for one. They said they would [screen users and block anyone targeted by sanctions](https://www.financedigest.com/how-artificial-intelligence-is-simplifying-sanctions-screening-for-insurers.html "How Artificial Intelligence is Simplifying Sanctions Screening for Insurers"). The standoff illustrates the ideological gulf between the traditional [financial sector and the world](https://www.financedigest.com/shakedown-on-horizon-for-financial-technology-world.html "Shakedown on horizon for financial technology world") of cryptocurrencies, whose roots lie in libertarian ideals and distrust of governments. The crypto exchanges argued that cutting off a whole nation would run counter to bitcoin’s ethos of offering access to payments free of [government oversight](https://www.financedigest.com/brexit-and-financial-services-a-government-oversight.html "Brexit and Financial Services – A Government Oversight?"). Yet some [anti-money laundering](https://www.financedigest.com/anti-money-laundering-time-to-take-a-new-approach.html "ANTI-MONEY LAUNDERING: TIME TO TAKE A NEW APPROACH?") specialists warned the exchanges could be keeping a route open for Russians to move money abroad, thus undermining Western efforts to pressure Russia to back away from war. “There’s no question sanctions are diminished,” said Ross Delston, a U.S. lawyer and former [banking regulator](https://www.financedigest.com/austrian-regulator-orders-system-relevant-banks-to-up-capital-buffers.html "Austrian regulator orders system-relevant banks to up capital buffers"), adding that cryptocurrencies “allow an avenue for a flight to safety that would not have existed otherwise. While most exchanges do require ID checks, the rigour of “know-you-customer” rules differs across the industry, worrying [regulators who see crypto as a vehicle for illicit cash](https://www.financedigest.com/uk-energy-regulator-drops-plan-to-ring-fence-customers-cash.html "UK energy regulator drops plan to ring fence customers’ cash"). Anti-money laundering and [crypto experts said people targeted by sanctions](https://www.financedigest.com/new-u-s-sanctions-imposed-for-russian-bank-oligarchs-crypto-miner-bitriver.html "New U.S. sanctions imposed for Russian bank, oligarchs, crypto miner BitRiver") may try to move funds via so-called privacy coins – a class of cryptocurrencies that obscures the identity of users more than bitcoin. [Supporters say they offer users greater protection](https://www.financedigest.com/supporting-a-fair-and-resilient-society-by-protecting-access-to-cash.html "Supporting a fair and resilient society by protecting access to cash ") from intrusive monitoring by governments. RUSH OUT OF ROUBLES [Russian households and businesses](https://www.financedigest.com/pizza-firm-dp-eurasia-delivers-profit-rise-evaluating-russian-business.html "Pizza firm DP Eurasia delivers profit rise, evaluating Russian business") have rushed to convert roubles into foreign currency, as the rouble hit a record low of 110 versus the dollar on Wednesday.\[ There are signs too that suggesting that people are scrambling to covert [savings to crypto](https://www.financedigest.com/behind-ftxs-fall-battling-billionaires-and-a-failed-bid-to-save-crypto.html "Behind FTX’s fall, battling billionaires and a failed bid to save crypto") – trading volumes between the rouble and cryptocurrencies hit 15.3 billion roubles ($140.7 million) on Monday, a three-fold jump from a week earlier, according to researcher CryptoCompare. The spike has worried regulators, with the European Commission looking at whether [crypto is being used to get around sanctions](https://www.financedigest.com/new-u-s-sanctions-for-russian-bank-oligarchs-crypto-miner-bitriver.html "New U.S. sanctions for Russian bank, oligarchs, crypto miner BitRiver"), an EU official said on Wednesday. The U.S. Treasury said Russia businesses or individuals would not be able to use crypto to skirt sanctions, citing problems converting digital currencies to traditional money via [financial firms](https://www.financedigest.com/turning-a-blind-eye-wont-work-for-financial-firms-as-the-fca-tightens-its-grip.html "TURNING A BLIND EYE WON’T WORK FOR FINANCIAL FIRMS AS THE FCA TIGHTENS ITS GRIP") that are subject to anti-money laundering rules. Even at the level of individual elites, laundering billions of dollars through digital wallets would expose themselves to those tracking flows within virtual currency markets,” a spokesperson said, adding that anti-money laundering [rules and sanctions also apply to crypto](https://www.financedigest.com/crypto-firms-will-develop-offshore-without-clear-us-rules-coinbase-chief-says.html "Crypto firms will develop ‘offshore’ without clear US rules, Coinbase chief says") exchanges. [Britain’s financial watchdog did not respond](https://www.financedigest.com/pm-rishi-sunak-sets-out-priorities-for-britain-responds-to-critics.html "PM Rishi Sunak sets out priorities for Britain, responds to critics") to requests for comment for this story. The crypto exchanges’ stance goes against that of several traditional [payment companies and fintech firms that have responded to sanctions by restricting services](https://www.financedigest.com/igtbs-payments-services-hub-faq.html "iGTB’s Payments Services Hub – FAQ") in Russia. Payments company Wise and remittance processor Remitly have, for instance, suspended money-transfer services in Russia, while [Apple Inc limited use of Apple Pay](https://www.financedigest.com/supporting-apple-pay-integration-in-japan.html "Supporting Apple Pay Integration in Japan"). U.S. payment card giants Visa Inc and Mastercard Inc also blocked multiple [Russian financial firms](https://www.financedigest.com/pizza-firm-dp-eurasia-considers-divestment-of-russian-business.html "Pizza firm DP Eurasia considers divestment of Russian business") from their networks. ‘LIBERTARIAN VALUES’ Ukraine’s Vice Prime Minister Mykhailo Fedorov on Sunday [asked crypto exchanges to block](https://www.financedigest.com/hermes-asks-court-to-block-metabirkin-nft-sales-after-jury-win.html "Hermes asks court to block ‘MetaBirkin’ NFT sales after jury win") the digital wallet addresses of Russian users, a move that would effectively stamp out their ability to trade crypto. Kraken CEO Jesse Powell said he would not acquiesce, calling bitcoin the “embodiment of libertarian values.” Blocking users from an entire [country “does not necessarily punish those who are actually responsible](https://www.financedigest.com/eu-countries-split-over-joint-response-to-energy-price-spike.html "EU countries split over joint response to energy price spike") and who may have already prepared for the possibility of blanket sanctions,” a Kraken spokesperson said. Kraken complies with legal and regulatory requirements of all jurisdictions where it operates, they added. Binance, the world’s largest crypto exchange, also refused to ban all Russian users but says it is blocking the [accounts of any clients](https://www.financedigest.com/iris-acquisition-enables-accountants-to-add-greater-value-to-their-clients.html "IRIS acquisition enables accountants to add greater value to their clients") targeted by sanctions. Crypto was meant to provide greater [financial freedom for people](https://www.financedigest.com/31972social-engineering-in-the-financial-services-people-are-the-weakest-link-in-the-security-chain.html "Social engineering in the Financial Services : People Are The  Weakest Link in the Security Chain") across the globe,” it said on Monday. Binance accounts for over 40% of all [crypto trades](https://www.financedigest.com/how-to-use-algorithms-to-save-time-and-make-money-when-trading-currency-crypto-shares-etc.html "How to use algorithms to save time and make money when trading (currency, crypto, shares etc)") in roubles, CryptoCompare said. A Binance spokesperson declined to comment on the figure, or give details of any sanctioned users it had blocked. U.S. cryptocurrency exchange Coinbase Global Inc too said it would not [impose a blanket ban on transactions involving Russians](https://www.financedigest.com/oil-prices-rise-after-opec-keeps-output-steady-russian-price-cap-imposed.html "Oil prices rise after OPEC+ keeps output steady, Russian price cap imposed"), though it would block accounts of those targeted by sanctions. Yet continuing to [operate in Russia](https://www.financedigest.com/mcdonalds-to-sell-russia-restaurants-to-local-operator-rebrand.html "McDonald’s to sell Russia restaurants to local operator, rebrand") likely poses risks for exchanges themselves, warned Joby Carpenter, a specialist in crypto and illicit finance at the Association of Certified Anti-Money Laundering Specialists. Exchanges and, ultimately, [banks where cryptoassets off-ramp will need to be alert](https://www.financedigest.com/asset-managers-on-alert-after-whatsapp-crackdown-on-banks.html "Asset managers on alert after ‘WhatsApp’ crackdown on banks") to these efforts to avoid breaching sanctions or terrorism legislation,” Carpenter said. ($1 = 108.7200 roubles) (Reporting by Tom Wilson; Editing by Sujata Rao and Pravin Char) --- This blog is powered by Superblog. Visit https://superblog.ai to know more. ---