Two major crypto exchanges failed to block sanctioned Russians

Huobi and KuCoin did not respond to requests for comment.

One year after Russia launched its full-scale invasion of Ukraine, a conflict that has since killed hundreds of thousands of soldiers on both sides and forced millions of Ukrainians from their homes, the news reveals the continuing limits of Washington’s efforts to wall off Russian institutions. and oligarchs from the wider financial system.

“Despite false claims by crypto lobbyists, this is further evidence that crypto is the currency of choice for illicit financing, including by Russians seeking to avoid sanctions,” Sen. Elizabeth Warren (D-Mass.) said in a statement

Politicians like Warren have been warning for most of a year that crypto markets represent a gaping vulnerability in US sanctions against Russia. While Treasury officials say they have seen little evidence that digital assets can be used to evade sanctions on a large scale, the United States has clamped down on services — including Russian exchanges and so-called hybrid services that make transactions harder to trace — in an effort to close the drain .

Inca, whose market monitoring tools have been used by the Commodity Futures Trading Commission and the Defense Advanced Research Projects Agency, prepared the report on the anniversary of the Russian invasion to shine a spotlight on how certain exchanges still allow Russians to move their holdings in and out of the country using peer -to-peer platforms despite escalating sanctions. The report identifies potential vulnerabilities at two other major exchanges, notably Binance – the world’s largest crypto trading platform and a frequent target of regulators around the world.

Binance offers “multiple methods” for Russians to convert local currencies to crypto, including through the exchange and a peer-to-peer market, according to the report. Although the platform does not allow users to use Russian credit cards, debit cards or accounts from sanctioned banks on its exchange, these deposits are available through the peer-to-peer marketplace, according to the report.

Binance called the report’s claims “categorically false” in a statement.

“Binance is a full-KYC [know your customer] platform and was the first major exchange to implement the EU’s crypto-related sanctions,” said Binance’s global head of sanctions, Chagri Poyraz. He said the company “takes the extraordinary extra step of filtering all forms of communication between users to ensure there is absolutely no potential connection with Russian entities through any kind of solution.”

The exchange has engaged in a major lobbying and public relations effort in recent weeks in an effort to fend off the ongoing push by state and federal agencies to rein in lightly regulated crypto businesses.

Binance has previously said it wants to settle any claims that may come from the Department of Justice or civil regulators. Patrick Hillmann, the exchange’s chief strategy officer, has acknowledged that Binance failed to verify the identity of its customers – a basic requirement for any financial business – during the first two years of operation. He said Binance has no timeline to reach an agreement with regulators.

Meanwhile, Singapore-based exchange ByBit allows users to convert Russian rubles into crypto using its peer-to-peer market and fiat deposits, according to the report. Russians can also buy crypto on the exchange after depositing fiat currency via an online digital wallet or a local bank card – including “any Russian-issued card.”

“Many of these exchanges officially curtailed their operations in Russia due to the imposed sanctions. They claimed to block users from Russia and prevent them from opening new accounts,” the report said. Instead, they have continued to work with Russian citizens , including allowing them to use maximum deposit, trade and withdrawal limits, the report said.

BitBy did not respond to a request for comment.