Leading global cryptocurrency exchange Binance today refuted a Reuters report claiming that it had agreed to provide Russian law enforcement with user data back in April 2021.
According to the Reuters report, published today, the Russian agency tasked with tackling money laundering, Rosfin, was "seeking to trace millions of dollars in bitcoin raised by jailed Russian opposition leader Alexei Navalny." Navalny ran for president in 2018 and was later poisoned—with signs pointing to Russia's Federal Security Service (FSB).
"Suggestions that Binance shared any user data, including Alexei Navalny, with Russian FSB controlled agencies and Russian regulators are categorically false," said Binance in a statement. "Prior to the war, Binance’s engagement in Russia was no different from that of any other international organization—from banks to burger restaurants."
Binance says it was lobbying the Russian government to develop a regulatory framework for cryptocurrency, not dissimilar to the efforts undertaken by the industry in the U.S. It also defended the need for regulated exchanges to work with governments: "Today, any government or law enforcement agency in the world can request user data from Binance as long as it is accompanied by the proper legal authority. Russia is no different."
However, it stressed that it doesn't rubber stamp requests and "reserves the right to reject law enforcement requests should they not stand up to scrutiny."
But the Reuters investigation paints a different picture, suggesting that the exchange not only sought out business from Russian users—as other financial firms have—but that it made concessions.
Reuters says that text messages show that Binance's regional head in Eastern Europe, Gleb Kostarev, agreed to share client data with Rosfin and later shared with a "business associate that he didn't have 'much of a choice' in the matter."
Kostarev, on his Facebook page, wrote, "It is an absolute lie that I or Binance leaked the data of Navalny or users [to] Rosfin or the FSB."
Navalny, one of the most prominent Russian opposition leaders, raised 658 BTC between December 2016 and February 2021, a haul now worth $26 million. Donations spiked both after he was poisoned and later jailed. Bitcoin and cryptocurrencies are a major funding channel for pro-democracy activists in Russia.
Human Rights Foundation executive Alex Gladstein told Decrypt back in February 2021, "In authoritarian regimes like Russia, the government has total control over the banking system, but doesn't control Bitcoin."
While much of the world viewed Russia and its president, Vladimir Putin, as authoritarian in 2021, the Russian invasion of Ukraine in February has made the state persona non grata across the globe. Western sanctions put in place over the past two months have hobbled the economy and put the value of the ruble on a rollercoaster ride.
In the early days of the war, trading volumes for ruble-Bitcoin and ruble-Tether hit their highest points in over half a year. Binance, along with other exchanges, publicly refused to agree to an informal request from Ukrainian Vice Prime Minister Mykhailo Fedorov to block all Russian IP addresses from trading. It did, however, confirm that it would block all Russian accounts that have been sanctioned by the U.S.
U.S. and European policymakers have applied additional scrutiny to cryptocurrency exchanges and services, lest they allow Russian officials to evade sanctions. However, U.S. Treasury Secretary Janet Yellen said earlier this month that the administration hasn't "seen significant evasion through crypto so far."