Since invading Ukraine, Russia has been considered the pariah of the business and financial world. But, in contrast to numerous companies from other industries, the significant cryptocurrency exchanges do not want to withdraw from the country. In doing so, they are undermining Western sanctions, warns Ross Dalston, a lawyer and former bank regulator. “Cryptocurrencies provide an escape route to safety that otherwise would not exist.”
Kraken, Binance and Coinbase continue to isolate Russia and persuade an end to the attack; Western states have banned some of the country’s banks from the Swift international payment system. In addition, foreign assets of the Russian central bank and individuals were frozen. Finally, Ukraine called on crypto exchanges to block all Russian users from trading Bitcoin, Ethereum & Co.
Kraken, one of the largest trading platforms, dismissed this demand: “The blockade of all users from a country does not necessarily affect those directly responsible, who have probably already prepared themselves for sanctions.” Irrespective of this, all legal and regulatory requirements of the individual states in which Kraken is active are observed.
World market leader Binance is also against a blanket ban but says it blocks accounts of users who the West has sanctioned. The US exchange Coinbase made a similar statement.
The EU wants to close holes.
New customers must identify themselves before opening an account with most crypto exchanges. However, the regulations are handled with varying degrees of strictness in the industry. It is a thorn in the authorities’ side as it facilitates illegal money transfers. The problem brought politics to the fore. The EU wants to close loopholes to circumvent the sanctions with the help of cryptocurrencies.
However, the US Treasury Department doubts that large sums of money can be brought to safety without sanctions. Finally, digital money must be exchanged back into traditional currencies via financial institutions subject to anti-money laundering legislation. It would set off alarm bells.
Russians bet on cryptocurrencies.
Since the outbreak of war at the end of February, Russians have fled to Bitcoin & Co in droves. According to the industry service CryptoCompare, cryptocurrencies with a volume of 15.3 billion rubles (128 million euros) were traded on Monday, three times as much in the previous week. The Binance exchange accounted for around 40 per cent of this.
So-called privacy coins, in which the anonymity of buyers and sellers is even more important than Bitcoin, for example, are prevalent. Among other things, this is helping the veteran of this type of cryptocurrency, Monero, to achieve a renaissance, says analyst Salah-Eddine Bouhmidi from brokerage house IG. Analyst Timo Emden from Emden Research also points to increased purchases of the cyber currency Tether, tied to the dollar exchange rate, with rubles.
Europe also wants to extend sanctions to Bitcoin and Co
Loopholes are to be closed in the sanctions imposed, which France’s Finance Minister Bruno Le Maire sees in the area of cryptocurrencies, for example. These should be added to the sanctions, he said on Wednesday evening. Russia must pay as high a price as possible for its attack on Ukraine.
Demand from Russia
Bitcoin has rallied since the war low, gaining more than a quarter in value. “Since the currencies of the two countries at war are under considerable selling pressure, people in the crisis regions are trying to use Bitcoin to bring their savings to safety,” says an analyst.
Because of the enormous loss of value of the Russian ruble against western currencies, many are trying to reallocate their savings into valuable assets. It also includes cryptocurrencies like Bitcoin or Theatre, whose price development is linked to the US dollar as a stable coin. In addition, according to Hettler, people who are on the Western sanctions lists should also use cryptocurrencies to protect their assets from government access.
Hype topics usually fall into one of two categories and, on closer inspection, turn out to be either “old wine in new bottles” or (for the time being) science fiction. Cryptocurrencies are well studied as a cultural phenomenon and technology, but many are already known about them. If you interpret it as a value bubble, there is hardly anything new about it. We had known bubbles since the 17th century when tulip bulbs were traded for ten times the annual salary. So the bottom line is: “It’s been around for a long time” – and nobody wants to hear that about the future.
