Crypto exchanges are at the forefront of Russian sanctions | Fieldfisher
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Crypto exchanges are at the forefront of Russian sanctions


United Kingdom

Coinbase announced on 7 March that it has blocked more than 25,000 crypto wallets tied to Russians suspected of illicit activity. The blocked wallets make up around 0.2 per cent of Coinbase’s 11.4 million monthly transacting users. Such action provides greater teeth to sanctions across the globe in response to Russia’s invasion of Ukraine.

Cryptocurrency had been considered by many to be a means through which sanctioned individuals or entities may seek to bypass sanctions given the perception that transactions are anonymous. In a blog post on 7 March, Coinbase's Chief Legal Officer, Paul Grewal, challenged this perception:
"(D)igital asset transactions are traceable, permanent, and public. As a result, digital assets can actually enhance our ability to detect and deter evasion compared to the traditional financial system."
Public blockchains offer visibility into the details of transactions, including information about the date and time of each transaction, the type of virtual asset transacted, the amount, the wallet addresses involved and the unique transaction identifier. Public blockchain data allows on-chain analysis to pursue the flow of crypto assets, which in turn enables victims of fraud to recover crypto losses or Government bodies to determine whether crypto assets are held in breach of sanctions.
Coinbase's appetite to root out bad actors is consistent with the evolving crypto industry, which is increasingly moving towards a far more mainstream environment analogous with the traditional banking sector. Binance's CEO, Changpeng Zhao, has also recently dismissed fears that virtual money could be used by the Kremlin to evade sanctions.
Inherent challenges remain given the breadth of cryptocurrencies and the vast number of exchanges operating to a wide-range of standards. However, the mainstream crypto exchanges are increasingly self-promoting a "quasi-regulated" approach in order to appease governmental pressures and to promote reputational integrity and as, suggested by Mr Grewal, are "committed to building a safe and responsible financial system that promotes economic freedom around the world". 
Further, in UK, the FCA is the anti-money laundering and counter-terrorist financing (AML/CTF) supervisor of UK crypto asset businesses. Businesses carrying out crypto asset activity in the UK must register with the FCA.
The Wall Street Journal recently reported that the U.S. is considering imposing sanctions on Russia’s cryptocurrency market, amid concerns that currencies like Bitcoin offer an alternative way to make irreversible cross-border transactions. Russian sanctions are evolving rapidly and it is vital that companies transacting with sanctioned individuals or entities do not inadvertently fail to keep up with their expanding obligations.

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