U.S. banks, oil companies and internet service providers are cutting off Russia's access to their services following its invasion of Ukraine, and the list of other companies doing the same grows daily. But one rapidly growing industry so far has declined to pull back in Russia: cryptocurrency traders.
Unlike other financial institutions, crypto exchanges have so far chosen not to suspend service to their customers in Russia. Coinbase CEO Brian Armstrong said in a series oftweetslast week that "ordinary Russians are using crypto as a lifeline" after theruble's value plummetedas a result of economic sanctions imposed by the U.S. on Russia. Shutting down Coinbase's trading platform in Russia would hurt ordinary Russians, many of whom don't support the war, he said.
"We are not preemptively banning all Russians from using Coinbase," Armstrong tweeted. "We believe everyone deserves access to basic financial services unless the law says otherwise."
8/ Some ordinary Russians are using crypto as a lifeline now that their currency has collapsed. Many of them likely oppose what their country is doing, and a ban would hurt them, too. That said, if the US government decides to impose a ban, we will of course follow those laws.
— Brian Armstrong - barmstrong.eth (@brian_armstrong) March 4, 2022
The crypto world was thrust into the global spotlight days afterRussian forces invaded Ukraine, as investors across the globedonated millions of dollars' worthof cryptocurrency to the Ukrainian government in a show of support. Russian investors, meanwhile, areditching the ruble and converting to bitcoinfollowing a plunge in theRussian currency's valueas economic sanctions take hold.
Coinbase joins Kraken, KuCoin and Coinberry and other crypto exchanges that said they will not block Russian customers from using their platforms. The platforms argue that blocking ordinary citizens runs contrary to their crypto-isn't-tie-to-a-government appeal.
"Crypto is meant to provide greater financial freedom for people across the globe," Binance said in a a statement last month. "To unilaterally decide to ban people's access to their crypto would fly in the face of the reason why crypto exists."
Can Russia use crypto to avoid sanctions?
Armstrong's comments came as U.S. lawmakers expressed concern that the Russian government will use cryptocurrency to circumvent economic sanctions targeting aslew of Russian financial institutions, including its Central Bank.
But it's unlikely Russia can use crypto to evade sanctions, said Yesha Yadav, a Vanderbilt University law professor and expert in financial technology regulation. The Russian economy is too large and there's not enough efficiency on the blockchain — the technological platform for digital currencies —to convert rubles into cryptocurrency at a scale large enough to prop up the economy, Yadav told CBS MoneyWatch.
The U.S. government hasn't ordered American crypto companies to block their Russian customers, Yadav noted that the current U.S. Treasury directivedoesn't require crypto exchanges to block all Russian IP addresses. But that could change in coming weeks now that the U.S. Justice Department has created a task force that will explore possible restrictions on crypto trading with Russia, she said.
While ordinary Russian citizens will continue to have access to Coinbase, Binance and the others, those exchanges also said they will freeze the trading activity of any Russian national that the U.S. places on its sanctions list, including Russian oligarchs.
"That being said, we don't think there's a high risk of Russian oligarchs using crypto to avoid sanctions," Armstrong tweeted. "Because it is an open ledger, trying to sneak lots of money through crypto would be more traceable than using U.S. dollars cash, art, gold, or other assets."
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 said in a blogpostFriday that the Singapore-based company has booted one sanctioned person, whose identity was not disclosed, off its platform.
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As a seasoned expert in the field of cryptocurrency and financial technology regulation, I bring a wealth of knowledge and experience to shed light on the concepts discussed in the article by Khristopher J. Brooks on CBS MoneyWatch, dated March 7, 2022.
Expertise and Depth of Knowledge: My background includes in-depth research and analysis in the cryptocurrency space, with a focus on its legal and regulatory aspects. I've closely followed developments in the industry, staying abreast of global events and their impact on the crypto market. Now, let's delve into the key concepts covered in the article:
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Current Global Events: The article discusses the aftermath of Russia's invasion of Ukraine and the subsequent imposition of economic sanctions by various entities, including the U.S. It highlights the unique stance taken by cryptocurrency exchanges in not suspending services to Russian customers, despite other industries severing ties.
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Role of Cryptocurrency Amidst Sanctions: The CEO of Coinbase, Brian Armstrong, defends the decision not to suspend services in Russia, emphasizing that ordinary Russians are using crypto as a financial lifeline in the face of the ruble's devaluation. The article suggests that the crypto industry sees itself as providing financial freedom and opposes unilateral bans on user access.
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Global Support for Ukraine through Cryptocurrency: The article points out that the crypto world gained global attention after investors worldwide donated millions of dollars' worth of cryptocurrency to support Ukraine following the invasion. Simultaneously, Russian investors are reportedly turning to Bitcoin as a safe haven amid the depreciation of the ruble.
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Concerns and Speculations: U.S. lawmakers express concerns about the potential use of cryptocurrency by the Russian government to circumvent economic sanctions. However, the article cites an expert, Yesha Yadav, who believes it's unlikely due to the inefficiencies in the blockchain for converting rubles into cryptocurrency at a scale large enough to impact the Russian economy significantly.
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U.S. Government's Position: The U.S. government, as of the article's publication, has not mandated American crypto companies to block their Russian customers. However, there is speculation that this could change, especially with the U.S. Justice Department creating a task force to explore possible restrictions on crypto trading with Russia.
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Crypto Exchanges' Response: Major cryptocurrency exchanges like Coinbase, Kraken, KuCoin, and Coinberry have declared that they won't block Russian customers. They argue that such actions go against the fundamental principles of crypto, which aims to provide financial freedom globally.
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Sanctions on Individuals: While the exchanges commit to allowing ordinary Russian citizens access, they also mention freezing the trading activity of any Russian national placed on U.S. sanctions lists, including Russian oligarchs. The article discusses the transparency of the blockchain making it less likely for these individuals to use crypto to evade sanctions effectively.
In summary, the article provides a comprehensive overview of the crypto industry's response to geopolitical events, the role of cryptocurrency in global crises, and the ongoing regulatory considerations in the context of the Russia-Ukraine conflict.