US eyes a crackdown on crypto amid Russian sanctions

1 Mar 2022

Image: © Igor Faun/Stock.adobe.com

While the spotlight is on crypto exchanges that could be used to bypass Russian sanctions, cryptocurrency donations are pouring into Ukraine.

With Russia facing financial sanctions from the EU, US and other nations, there have been concerns that individuals and organisations in the country would turn to crypto to bypass restrictions.

But now, CoinDesk reports that the US government is adding crypto rules to its sanctions guidance.

Future Human

In an update being published today (1 March), the US Treasury warns against US-based exchanges facilitating “deceptive or structured transactions or dealings to circumvent any United States sanctions, including the use of digital currencies or assets or the use of physical assets”.

Since the invasion of Ukraine began last week, nations have been targeting Russia with sanctions.

“Selected Russian banks” are to be removed from the international bank transaction system SWIFT under an agreement made at the weekend, and the US is now imposing sanctions on Russia’s central bank and other sources of wealth.

But Bloomberg reports that Biden administration is also asking crypto exchanges to help ensure individuals and organisations in Russia aren’t using cryptocurrencies to sidestep sanctions.

It follows a similar call from Ukraine’s vice prime minister, Mykhailo Fedorov, who tweeted over the weekend asking crypto exchanges to block Russian users.

However, exchanges are not fully on board. While Binance is blocking the accounts of Russian clients targeted by sanctions, it has said it will not “unilaterally” freeze the accounts of all Russian users.

A spokesperson for the world’s largest crypto exchange told CNBC that crypto is “meant to provide greater financial freedom for people across the globe” and a blanket ban would “fly in the face of the reason why crypto exists”.

Coinbase, another major exchange, has also refused to introduce a ban on all Russian addresses but said it will comply with sanctions.

Jesse Powell, CEO of the exchange Kraken, tweeted that the company “cannot freeze the accounts of our Russian clients without a legal requirement to do so.”

Crypto crowdfunding

Meanwhile, crypto donations are pouring into Ukraine.

Over the weekend, Twitter accounts belonging to the Ukraine government and politicians urged people to donate in bitcoin, Ethereum and Tether.

Since then, cryptocurrency investors have donated millions to back the Ukraine government and an NGO that supports the country’s military. The alternative crowdfunding method is being seen as a quick way to transfer funds across borders.

Blockchain analytics provider Elliptic puts the current fundraising figure at $24.6m from 26,000 crypto asset donations.

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Sarah Harford is sub-editor of Silicon Republic

editorial@siliconrepublic.com