Ukrainian Vice Prime Minister Calls on Crypto Exchanges to Ban Russian Users

Ukrainian Vice Prime Minister and Minister of Digital Transformation, Mykhailo Fedorov, has called on 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,” Fedorov tweeted yesterday. 

One day before, Fedorov took to Twitter to ask for information about crypto wallets linked to Russian and Belarusian politicians. 

“Ukrainian crypto community is ready to provide a generous reward for any information about crypto wallets of Russian and Belarusian politicians and their surroundings. War crimes must be pursued and punished,” Fedorov said, adding a link to his Telegram in the tweet. 

Ukraine and crypto 

Fedorov’s requests form just part of the wider crypto dynamic impacting on the conflict between Russia and Ukraine. 

After Russia invaded Ukraine last week, the international community responded with widespread and sweeping economic sanctions levied against the state of Russia, the Russian economy and its government. 

Yet despite this international response—which includes a ban on Russian banks from the SWIFT payment system—there is concern that Russia could utilize cryptocurrencies to evade sanctions.

“As with the traditional financial system, Russia can leverage cryptocurrency to evade the sanctions that are being put in place in response to their invasion of Ukraine," Caroline Malcolm, Head of International Policy at blockchain analytics firm Chainalysis, told Decrypt last week, while pointing out that “transactions from identified sanctioned entities” could be identified.

Meanwhile, cryptocurrency donations to Ukraine have been pouring in since Russia’s invasion began. 

On February 26, 2022, the Ukrainian government’s official Twitter account announced it was “now accepting cryptocurrency donations” in a tweet that also shared Bitcoin and Ethereum wallet addresses. 

To date, over $18 million in cryptocurrency has been sent to the addresses.

Exchanges respond

Since Fedorov's request, two prominent crypto exchanges have refused to freeze Russian accounts on their platforms.

"We are not going to unilaterally freeze millions of innocent users' accounts," a Binance spokesperson reportedly told CNBC.

"Crypto is meant to provide greater financial freedom for people across the globe. To unilaterally decide to ban people's access to their crypto would fly in the face of the reason why crypto exists."

In turn, Kraken CEO Jesse Powell tweeted, "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."

Powell added that Russians should be "aware" that this kind of requirement may be imminent.

"I think there is a reputation issue here. Do you want now or after the fact to be known as the exchange that facilitated sanctions evasion, even if it were not technically illegal?" Tom Keatinge, founding Director of the Centre for Financial Crime and Security Studies at the Royal United Services Institute told Decrypt.

"I wonder if the exchanges will follow the same path as Eurovision or FIFA. I guess they can make their choice but when they lose Western banking access for having facilitated sanctions evasion, they might regret it," Keating added in an email to Decrypt.