Major Crypto Exchanges Won't Ban All Russian Transactions

(March 1, 2022, 9:36 PM EST) -- Coinbase and other major cryptocurrency exchanges have said they won't issue blanket bans on cryptocurrency transactions with Russian addresses, after a Ukrainian official recently called for crypto exchanges to block all Russian users.

Since Russia's invasion of Ukraine began on Feb. 24, Ukrainian Vice Prime Minister Mykhailo Fedorov, who is also the nation's minister of digital transformation, has taken to Twitter to call on fintech companies and major technology giants, including Apple, Google and Meta, to ban or freeze Russian user accounts.

In a Feb. 27 post, Fedorov urged all major crypto exchanges to block crypto users who have addresses in Russia.

"It's crucial to freeze not only the addresses linked to Russian and Belarusian politicians, but also to sabotage ordinary users," Fedorov wrote.

But Coinbase Global Inc.'s Chief Legal Officer Paul Grewal — who is a former magistrate judge and former Facebook deputy general counsel —wrote Monday on Twitter that the company wouldn't issue a "blanket ban" on all Russian users, and he shared a post stating that such a ban would punish ordinary Russian citizens who are experiencing "historic currency destabilization" due to the Russian government's actions.

Coinbase, which went public last year and is the United States' largest crypto exchange, said in a statement Tuesday that the company will not ban transactions involving Russian addresses, but will implement "all sanctions that have been imposed, including blocking accounts and transactions that may involve sanctioned individuals or entities."

Other major crypto exchanges had similar responses to Fedorov's request.

The San Francisco-based cryptocurrency exchange Kraken said in a statement Tuesday that freezing access to digital assets of citizens from an entire country does not necessarily punish bad actors and individuals who may have already prepared for the possibility of blanket sanctions.

"While Kraken cannot comment on specific cases, we have always advocated for crypto on the basis that it empowers the rights and interests of the individual over that of any particular interest group, political faction or government entity," the statement says.

Kraken added that the company hopes a solution can be found that doesn't cause unnecessary harm to the individuals, families and businesses who played no part in the decision to invade Ukraine.

A spokesperson for the Cayman Islands-based Binance, which is the largest crypto exchange in the world in terms of daily trading volume, said Tuesday that the company has assembled a global compliance task force made up of "world-renowned sanctions experts" to ensure the exchange takes action against those that have had sanctions levied against them while minimizing the effects on innocent users.

"Should the international community widen sanctions, we will apply those aggressively as well," Binance's statement says.

Crypto exchange eToro said Wednesday that it does not onboard users from Russia, and crypto exchange Gemini said it is not operational in Ukraine and Russia. 

Gemini's statement added that the company is still reviewing customer accounts and activity to identify any exposure to sanctioned parties or regions and will take appropriate steps as necessary.

"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 [Office of Foreign Assets Control] and other applicable lists," the statement said.

Crypto exchange didn't immediately respond Tuesday to Law360's requests for comment.

In recent days, the Ukrainian government has developed a complicated relationship with crypto. On Tuesday, days after asking crypto exchanges to freeze Russian-based crypto transactions, Fedorov praised the crypto community on Twitter, including blockchain developer Solana, for supporting Ukraine with crypto donations worth tens of millions of dollars.

As of early Monday, the Ukrainian government and groups supporting its military had raised an estimated $22.2 million in crypto-asset donations since the start of the Russian invasion, according to a report from blockchain analytics firm Elliptic.

But last week New York's Department of Financial Services warned in an industry letter that the Russian invasion has "significantly" increased the risk that cryptocurrency could be used as a sanctions dodge. Russia is also developing its own central bank digital currency, which could help Russian entities make transactions outside the traditional banking system.

The letter, which was signed by DFS Superintendent Adrienne A. Harris, came on the heels of a punishing round of economic sanctions announced by the U.S. Treasury Department in response to the launch of Russian military operations in Ukraine.

Those sanctions are aimed at cutting off much of Russia's banking sector from international markets and restricting access to capital for critical Russian enterprises. Other Western governments have also imposed sanctions, and additional measures have since been unveiled — including plans announced by the White House for booting some Russian banks from SWIFT, the global payment system. 

--Additional reporting by Elise Hansen, Jon Hill and Daniel Wilson. Editing by Rich Mills.

Update: This story has been updated to include comments from Gemini and eToro.

Correction: An earlier version of this story misstated Grewal's title at Facebook. The error has been corrected.

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