Following Russia’s full-fledged invasion of Ukraine, a flood of users shifted to crypto in both Ukraine and Russia. Some Russians have moved their money into cryptocurrencies to protect it from the falling value of the Ruble (RUB). In contrast, Ukrainians have done so after their government declared martial law and suspended e-money transactions such as Venmo and PayPal.
The Ruble has lost more than half of its market value since the invasion began. Furthermore, Russia has been subjected to many economic sanctions, including exclusion from the global payment system SWIFT. Prominent Russian citizens and organizations have been placed on the US Sanctions List, effectively barring American companies from doing business with them.
Coinbase has blocked more than 25K wallet addresses on Sunday to prevent Russian investors or entities from engaging in illegal activity.
According to Kaiko, Bitcoin trading pairs denominated in rubles increased by “magnitude” on March 5. On February 24, when Russia invaded Ukraine, the average trade size of Bitcoin ruble transactions on Binance reached a 10-month high of around $580.
Coinbase’s chief legal officer, Paul Grewal, stated in a blog post that the company has also shared the addresses with the US government to assist it with sanctions enforcement, which includes financial transaction bans for several Russians and Russian companies.
However, a Coinbase spokesperson stated in a statement that the company had flagged the majority of Russian-linked accounts based on their activity before the start of the war. According to the spokesman, there has been no increase in sanction-evading activity on the service since the invasion.
Many cryptocurrency exchanges are publicly resisting pressure from the Ukrainian government and the US and European politicians to ban Russian users from their platforms.
According to a spokesperson for Binance, the world’s largest cryptocurrency exchange, unilaterally freezing Russian users’ accounts would “fly in the face of the reason why crypto exists.”
On March 4, 2022, Coinbase CEO Brian Armstrong posted a series of tweets, one of which read, “Some ordinary Russians are using crypto as a lifeline now that their currency has collapsed.” Many of them are likely to oppose what their country is doing, and a ban would be detrimental to them as well. That being said, if the US government decides to impose a ban, we will, of course, abide by the rules.”
Armstrong added in the same thread, “Coinbase isn’t preemptively barring all Russians from using the platform.” Unless the law says otherwise, we believe everyone deserves access to basic financial services.”