Bitcoin and altcoin exchanges are under pressure to take a stand in Russia’s war in Ukraine.
This is a situation that crypto exchanges would have liked to avoid.
They who advocate financial inclusion are under pressure to choose sides, after the Russian invasion of Ukraine was followed by sanctions from the United States, the European Union and the United Kingdom.
This pressure weakens their motto that they are borderless and do not discriminate unlike centralized finance.
But at the same time, they do not want to alienate either the regulators or some of their customers who support the Ukrainians through donations.
It is a real dilemma that cryptocurrency exchanges are facing, especially since they have been publicly challenged by the Ukrainian authorities.
“I’m asking all major crypto exchanges to block addresses of Russian users,” Ukrainian Vice Premier minister Mykhailo Fedorov posted on his Twitter account. “It’s crucial to freeze not only the addresses linked to Russian and Belarusian politicians, but also to sabotage ordinary users.”
Most of the established digital currency exchanges have rejected this request, while making it known that they have made donations to Ukraine.
Binance, the world’s leading crypto exchange, said it has donated $10 million to help Ukrainian people through United Nations organizations.
“I understand the rationale for this request but, despite my deep respect for the Ukrainian people, @krakenfx cannot freeze the accounts of our Russian clients without a legal requirement to do so,” Jesse Powell, CEO of crypto exchange Kraken responded on Twitter.
He added that:
“The People’s Money is an exit strategy for humans, a weapon for peace, not for war,” referring to crypto.
No Legal Basis to Block Russian Accounts
In general, cryptocurrency exchanges argue that they have no legal basis to deny access to Russians. But things may change if they receive directives from governments imposing sanctions on the Russians.
“Binance follows sanctions rules very strictly, whoever is on the sanctions list won’t be able to use our platforms,” Binance CEO Changpeng Zhao told Bloomberg TV.
Gemini, which is available in the United States and the United Kingdom, said that it is subject to the requirements and requests of regulators in these two jurisdictions.
“As a regulated entity, Gemini is subject to and complies with anti-money laundering, counter terrorist financing, and know your customer (KYC) obligations,” the firm said in an email statement to TheStreet.
“Gemini is not operational in Ukraine and Russia. However, we are conducting a robust review of customer accounts and activity to identify any exposure to sanctioned parties or regions and will take appropriate steps as necessary.”
The platform, founded by the Winklevoss brothers, Tyler and Cameron, insisted that it has “robust” controls in place to identify and verify the identity of its customers and monitor transactions occurring through its platform and on the blockchain.
“Gemini takes steps to keep bad actors off of its platform by screening all new and existing customers and their related parties against the names of individuals and entities added to OFAC and other applicable lists.”
Office of Foreign Assets Control (OFAC) administers and enforces U.S economic and trade sanctions.
Coinbase (COIN) , the most popular crypto exchange in the United States, did not respond to requests from TheStreet.
The U.S Treasury Department is reportedly finalizing its guidelines on how to crack down on assets held as cryptocurrency.
The new rules aim to restrict “deceptive or structured transactions or dealings to circumvent any United States sanctions, including through the use of digital currencies or assets or the use of physical assets.”
