If Western sanctions become more severe, CEXs may be obliged to prohibit all Russian users from utilizing their services, as they did in Iran earlier.
CEXs and CEOs from businesses like Binance, Coinbase, and Kraken have all declared that they will solely freeze the assets of Russian clients targeted by Western sanctions, not the assets of common Russian consumers.
Ukraine’s minister of digital transformation, Mykhailo Fedorov, had called on “all major crypto exchanges to block [wallet] addresses of Russians” and “also to sabotage ordinary users [by freezing their funds]” just days before. Brian Armstrong, CEO of Coinbase, notably wrote: In explaining why he was not prematurely banning all Russians (albeit Coinbase is not available in Russia), he specifically wrote:
“Unless the law states differently, we believe everyone deserves access to fundamental financial services.” Now that their currency has collapsed, some regular Russians are turning to cryptocurrency as a lifeline. Many of them are likely to be opposed to what their country is doing, and a ban would be detrimental to them as well.”
“If the United States government decides to implement a ban, we will, of course, observe those laws,” Armstrong added. Kraken CEO Jesse Powell reiterated the thoughts of this message, saying:
“Without a legal need, Kraken cannot freeze the accounts of our Russian clients.” The Russians should be aware that such a requirement may be in the horizon.”
Individuals who have not been sanctioned appear to be suffering the effects of sanctions. Binance had notified the day before that cardholders of sanctioned Russian banks would be unable to use their cards on its platform. In response to requests for CEXs to crack down on Russian consumers, Redditor u/Sammy12xyz raised the problem of Iranian crypto enthusiasts on Friday, claiming:
“Iranian accounts have already been affected.” For the past two years, we’ve been locked out of Binance, and no one has said anything. “Are we not blameless?”
Regardless of the fines, it appears that there are a few, albeit limited, techniques to get around them. One KuCoin moderator put it this way:
“Iranians are welcome to utilize our exchange, however KYC [Know Your Customer] is not available. If you prefer to proceed without completing KYC, you may still use our exchange as usual, even if you are not verified. Unverified accounts, on the other hand, will have a withdrawal restriction of 5 BTC per 24 hours.”
Furthermore, CEX prohibitions on Iranian IP addresses are purportedly circumvented via VPNs. Although one Iranian crypto enthusiast claims that cryptocurrencies like Bitcoin (BTC) are required to buy VPNs in Iran, such firms do not take fiat payments from Iranians due to restrictions.
Disclaimer: These are the writer’s opinions and should not be considered investment advice. Readers should do their own research.