As the West continues to impose more sanctions against Russian banks following Russia’s invasion of Ukraine, one Ukrainian official has called for sanctions on Russians’ cryptocurrency holdings as well.
Mykhailo Fedorov, minister of digital transformation of Ukraine, took to Twitter on Sunday to urge the global cryptocurrency exchanges to block addresses of Russian users.
He emphasized that exchanges should freeze not only the addresses tied to Russia and Belarus officially but also to “sabotage ordinary users.”
Fedorov subsequently pointed out that some industry-related services have already moved to freeze assets from Russia and Belarus, including the nonfungible token platform DMarket.
“Funds from these accounts could be donated to the war effort. Nowadays Robin Hoods. Bravo,” Fedorov stated. He also cited the ongoing measures taken by the social media giant Meta regarding Russia’s attack on Ukraine.
Fedorov’s appeals could potentially be catastrophic for the Russian cryptocurrency market, as Russians were estimated to hold more than $200 billion in crypto as of early February.
As the Russian ruble has been plummeting against the United States dollar and the euro, Russians have been increasingly cashing out their bank holdings and apparently considering crypto investments. As such, BestChange, a major crypto exchange aggregator in Russia, has observed a 20% increase in visits amid Russia’s invasion of Ukraine, a spokesperson for the firm told Cointelegraph.
Leaving Russia could also be disastrous for major global exchanges such as Binance, as the Russian market is apparently Binance’s second-biggest market after Turkey in terms of website traffic.
Binance won’t freeze Russians’ Bitcoin
Binance does not plan to freeze assets by Russians because this would contradict cryptocurrency’s main principles of financial freedom, a spokesperson for the firm told Cointelegraph on Monday:
“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.”
The representative added that the exchange is taking measures to ensure that sanctions are against sanctioned entities in Russia while “minimizing the impact to innocent users.” “Should the international community widen those sanctions further, we will apply those aggressively as well,” the spokesperson added.
Some crypto executives believe that sanctions against Russia are eventually inevitable. However, they should target only select persons as the U.S. Office of Foreign Assets Control usually does.
“We think that the sanctions will be inevitable by naming new sanctioned persons as US/OFAC has done in the past. However, banning all crypto companies from offering services to ordinary Russians would not make sense and would cause more harm for everyday people than good,” LocalBitcoins chief marketing officer Jukka Blomberg told Cointelegraph.
Kraken CEO Jesse Powell also said that the Kraken exchange will not be able to freeze the accounts of the exchange’s Russian clients without a legal requirement. “Russians should be aware that such a requirement could be imminent,” he added. Powell previously recommended Kraken users move their crypto assets out of the exchanges, referring to Canada’s Emergency Act freezing the crypto of dissidents.
While it’s yet to be seen whether other crypto exchanges opt to freeze Russia’s crypto assets, many crypto companies have been actively working to support Ukrainian refugees and soldiers.
On Sunday, Binance launched the Ukraine Emergency Relief Fund to provide emergency relief through crypto crowdfunding. The crypto exchange also donated $10 million to help the humanitarian crisis in Ukraine.
Crypto payment processor CoinGate has introduced a similar initiative as well, opening a special fundraising account to support the Ukrainian Armed Forces. The fundraising effort aims to allow users to make donatio in more than 70 cryptocurrencies, with the funds going directly to the National Bank of Ukraine.
Local crypto exchanges have also been moving fast to react, with the Ukrainian Kuna exchange last Thursday launching a crypto fund to help charities aiding the army and the state in their resistance against the Russian invasion.
According to Cointelegraph’s estimations, Ukraine has raised over $23 million worth in crypto since the launch of various donation campaigns.
On Sunday, Russia’s Prosecutor General’s Office warned Russians that any help to a foreign country during the period of the “special operation to protect the DPR and LPR” will be regarded as treason to the Motherland, an offense that carries a prison term up to 20 years.
Additional reporting by Cointelegraph’s writer Zhiyuan Sun.