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Crypto companies resisting calls to terminate Russian accounts

Following Russia’s invasion of Ukraine, American banks, oil firms, and internet service providers are blocking Russia’s access to their services, and the list of other companies doing the same is growing everyday. However, one fast rising industry in Russia has so far refused to halt its expansion: bitcoin traders.

Crypto exchanges, unlike other financial institutions, have chosen not to halt service to their Russian customers. After the ruble’s value plunged as a result of US economic sanctions, Coinbase CEO Brian Armstrong remarked in a series of tweets this week that “regular Russians are utilising crypto as a lifeline.” Many people believe that shutting down Coinbase’s trading platform in Russia would harm ordinary Russians.

Days after Russian soldiers invaded Ukraine, the crypto industry was forced into the spotlight as investors from all around the world contributed millions of dollars in bitcoin to the Ukrainian government as a show of support. Meanwhile, Russian investors are abandoning the ruble in favour of bitcoin, as the value of the Russian currency has plummeted as a result of economic sanctions.

Coinbase joins Kraken, KuCoin, Coinberry, and other crypto exchanges in stating that Russian customers would not be barred from utilising their services. Blocking ordinary folks, the platforms contend, goes against their crypto-is-not-tied-to-a-government argument.

Binance claimed in a statement last month that “crypto is supposed to promote more financial independence for people all over the world.” “Banning people’s access to their crypto on a whim would be contrary to the reason why crypto exists.”

Armstrong’s remarks came as US lawmakers voiced fear that the Russian government would utilise cryptocurrencies to evade economic restrictions imposed on a number of Russian financial institutions, including the Central Bank.

However, according to Yesha Yadav, a Vanderbilt University law professor and expert in financial technology legislation, Russia is unlikely to employ crypto to circumvent sanctions. The Russian economy is too big, and the blockchain — the technology platform for digital currencies — isn’t efficient enough to convert rubles into cryptocurrencies on a large enough scale to help the economy, according to Yadav.

The US government has not instructed crypto firms in the United States to restrict their Russian customers, according to Yadav, who also pointed out that the current US Treasury mandate does not require crypto exchanges to block all Russian IP addresses. But, she warned, things might change in the coming weeks now that the US Justice Department has formed a task force to look into possible crypto trading limits with Russia.

“That said, we don’t believe there’s a large chance of Russian oligarchs utilising crypto to circumvent sanctions,” Armstrong stated in a tweet. “Trying to smuggle large sums of money through crypto would be more traceable than using US dollars cash, art, gold, or other assets because it is an open ledger.”

A Coinbase spokesperson confirmed to CBS MoneyWatch that sanctioned Russians will be blocked, but declined to say who or how many people on the sanctions list have Coinbase accounts. Binance CEO Changpeng Zhao announced in a blog post on Friday that the Singapore-based business had kicked one sanctioned user off its network, whose identity was not revealed.