What new EU sanctions mean for crypto exchanges and their Russian clients

Nine months into the conflict between Ukraine and Russia, sanctions against the latter have continued to grow at an aggressive pace. This time EU lawmakers announced that they are introducing a complete ban on all cross-border crypto payments between Russia and its citizens.

To elaborate, the EU has now initiated a ban on all “wallets, accounts or custody services for crypto-assets, regardless of wallet size” in response to Russia’s continued annexation of Ukrainian land, repeated in-country troop mobilization and threats of nuclear escalation.

It is worth noting that previous sanctions had limited cryptocurrency payments between Russian and EU wallets to around $9,700, or €10,000. The new ban seeks to strip the Kremlin of its military power while curtailing critical components of its industrial complex.

Russian crypto users under fire from all sides

In light of the EU’s aforementioned sanctions, a number of cryptocurrency exchanges popular in the region, including LocalBitcoins, Crypto.com and Blockchain.com, sent emails to their customers telling them to withdraw their funds as soon as possible as they did not would be able to. to use their services hereafter.

It is worth considering that as of September 2022, LocalBitcoins accounted for a whopping 8% of Russia’s crypto trading volume, the exchange’s largest customer base by far. Also, prior to the ban, Russian users were responsible for facilitating just under 20% of all total BTC trading volumes on the exchange.

One of the world’s largest crypto exchanges, Binance, is also working to implement the new restrictions. However, a representative of the firm told Cointelegraph that these changes may take some time to go live, with no set date for the same. Similarly, Bitfinex, an exchange that had previously spoken out against the increasing sanctions against Russian nationals, recently changed its tune, arguing that it may have to change its policies if they are “directed by the regulatory authorities” by which they are governed.

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Finally, earlier this month, popular blockchain developer Dapper Labs suspended Russian citizens from accessing its wide range of digital asset services. As a result, users from that side of the world will no longer be able to access the firm’s popular NFT marketplace along with several other crypto products.

The effects of the ban

To better understand the situation, Cointelegraph reached out to Ajay Dhingra, head of research and analysis for cryptocurrency exchange Unizen. Taking a more holistic approach to the matter, he highlighted that a primary use of digital assets is to help citizens of a country at war protect their savings, adding:

“The ban will cause pain for Russian retail and some financial institutions. Given the fact that BTC experienced a sharp rise in price when the war broke out, European authorities noted this loophole in their strategy to contain and stifle Russia.”

Similarly, Przemysław Kral, CEO of Zonda – one of Eastern Europe’s largest exchanges by volume – told Cointelegraph that the sanctions, along with the EU’s yet-to-be-finalized Markets in Crypto-Assets regulation, which will be enforced by the EU’s Financial Action Task Force, could potentially redefine the region’s crypto landscape for the foreseeable future, adding:

“As the situation escalates, regardless of their personal views on crypto regulation, the exchange’s decision to comply with the new EU sanctions is a moral and ethical responsibility that all companies should carefully consider.”

What happens to the ruble pairs held by these exchanges?

In the past, regulators have taken a heavy hand with exchanges that continue to allow residents of blacklisted countries to trade on their platforms, which begs the question: What will exchanges with huge volumes of rubles as trading pairs do with these assets? Dhingra said:

“This time they will be careful, given the brevity of the situation. The exchanges now have no choice but to realize large losses on their balance sheets. However, the ban will bring decentralized finance back into the spotlight, as it provides a censorship-resistant and easily accessible infrastructure for people living in a geopolitical unrest.”

Kral noted that it is currently unclear whether exchanges will be forced to return money to Russian users, block access to them or freeze their accounts until the sanctions are lifted. Finally, he highlighted that Zonda closed all Russian accounts during the first round of sanctions back in May, and returned all ruble-paired assets to their rightful owners.

Many exchanges are still in operation under the ban

As mentioned earlier, although Binance is still considering restricting its services for Russian users, it is currently operating as usual. Similarly, US-based exchange Kraken has not imposed any order on its Russian clients, with no indication as to whether it will decide to voluntarily adopt EU requirements or not.

Another popular exchange that has yet to initiate any sort of ban is Antigua and Barbuda-based FTX. The same has been the case for the popular Russian cryptocurrency platform Garantex, which continues to provide traders in the region with a wide range of advanced services such as futures and derivatives.

Other popular platforms operating in the region include Seychelles-registered Huobi Global, OKX, Kucoin and Mexc Globa. Indeed, Singapore-registered Bybit told a crypto outlet that it will continue to stand by its ethos of freedom, openness and decentralization and not impose any sanctions on Russian clients, many of whom may agree with the war or stance. taken by their leaders.

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Finally, it should be noted that the UK-based crypto exchange Exmo, which is extremely popular across Eastern Europe, recently sold its Russian operations to a local vendor earlier this year. The platform continues to be operational in Russia and its neighboring nations of Belarus and Kazakhstan via the Exmo.me domain name.

As the war between Ukraine and Russia continues, it will therefore be interesting to see how crypto companies operating in the region adapt to new and changing geopolitical realities.