Ukraine urges crypto exchanges to freeze Russian accounts

Binance has so far rejected the call, instead donating $10m for Ukrainian humanitarian relief

A soldier looking at the Ukrainian flag                                 
Ukraine calls for action from crypto exchanges – Photo: Shutterstock
                                

The Ukrainian government has asked the world’s cryptocurrency exchanges to freeze the accounts of their Russian and Belarusian customers. The request follows the Russian invasion of Ukraine, which has been assisted by Belarus.

Vice prime minister and minister of digital transformation Mykhailo Fedorov tweeted: “I’m asking all major crypto exchanges to block addresses of Russian users. It’s crucial to freeze not only the addresses linked to Russian and Belarusian politicians, but also to sabotage ordinary users.” 

An earlier call for help

Fedorov had enjoyed a previous success over the weekend when he had used Twitter to ask Elon Musk to maintain Ukraine’s internet access via his Starlink satellite system.

In a Tweet sent on 26 February, Fedorov urged the US billionaire “to provide Ukraine with Starlink stations and to address sane Russians to stand”.

Musk promptly announced that the service was active in Ukraine and promised to provide further terminals. 

The vice prime minister also publicly thanked Meta’s president for global affairs, former British deputy prime minister Nick Clegg, for “blocking Russian propagandists and media outlets”. He added: “There is no place for war criminals in the Metaverse.”

Mixed response from exchanges

As of Monday morning, Federov’s latest request had received a mixed response. 

DMarket, a platform for NFT and Metaverse items, announced that it had decided to freeze the accounts of users from Russia and Belarus. In addition, it also donated the seized funds to the Ukrainian war effort. The start-up is headquartered in California and has offices in London and Kyiv. 

Binance, one of the world’s largest cryptocurrency exchanges, rejected Federov’s call, however. According to Reuters, a representative of the company stated: “We are not going to unilaterally freeze millions of innocent users’ accounts. Crypto was meant to provide greater financial freedom for people across the globe.”

On Sunday, Binance announced plans to donate $10m to help the humanitarian crisis in Ukraine. It also launched the Ukraine Emergency Relief Fund “to provide emergency relief through crypto crowdfunding”.

Jesse Powell, the co-founder of the popular exchange Kraken, also rejected the call to freeze accounts. He stated on Twitter: ”I understand the rationale for this request but, despite my deep respect for the Ukrainian people, Kraken cannot freeze the accounts of our Russian clients without a legal requirement to do so.”

He added: “Sometimes the hardest thing about having power is knowing when not to use it. Our mission is better served by focusing on individual needs above those of any government or political faction. The People’s Money is an exit strategy for humans, a weapon for peace, not for war."

Sanctions and regulations

The rouble’s recent plunge to record lows against the US dollar has reportedly triggered bank runs in some parts of Russia. In light of this, cryptocurrencies may be seen as a possible safe-haven from devaluation and sanctions. However, the Russia-Ukraine conflict has prompted some western politicians and regulators to step up calls for greater cryptoasset regulation. 

Although substantial sanctions have already been imposed on Russia, it is feared that prominent Russian politicians and business figures could sidestep such restrictions by using the less centralised media of exchange.

When asked in a recent press briefing whether Russia could use cryptoassets to skirt sanctions, Christine Lagarde, the president of the European Central Bank (ECB), replied: “There are always criminal ways to try to circumvent a prohibition, which is why its so critically important that MiCA pushed through as quickly as possible so we have a regulatory framework.”

Markets in Crypto Assets (MiCA) is a broad-ranging piece of legislation focused on crypto regulation. The proposed legislation is currently waiting on a vote by the European Parliament.

Further reading

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