UAE reaffirms commitment to fight money laundering, terror financing

Cryptocurrency exchanges Coinbase and Binance reiterated on Friday they do not plan to cut off their Russian clients from using their platforms, even as mainstream finance companies keep their distance.

Ukraine’s Vice Prime Minister Mykhailo Fedorov on Feb. 27 asked crypto exchanges to block the digital wallet addresses of Russian users, effectively stopping them from trading crypto.

“We believe everyone deserves access to basic financial services unless the law says otherwise,” Coinbase CEOBrian Armstrong said in a series of tweets on Friday.

“We are not going to unilaterally freeze millions of innocent users’ accounts,” a spokesperson of Binance, the world’s biggest crypto exchange, said in an emailed statement to Reuters.

The decision is a risk for the exchanges as they still have to comply with sanctions on Russian banks, companies and individuals, a list that has been growing almost daily as Western countries seek to isolate the Russian economy in response to its invasion of Ukraine. 

Most major Russian banks have been shut out of the SWIFT international payments system.

While crypto exchanges have increasingly been hiring experienced compliance staff, getting it wrong could be the end of the road for some of these businesses. 

BNP Paribas was hit with a $9 billion penalty from US authorities in 2015 for processing payments on behalf of sanctioned companies. HSBC and Société Générale have agreed to intrusive audits by regulators in lieu of financial punishments.

However, the rewards for getting it right are significant, both financially and reputationally. 

Trading volumes between the ruble and cryptocurrencies hit $141 million on Monday, a three-fold week-on-week increase according to Reuters.

Successfully serving Russian clients while complying with sanctions could also give the biggest cryptocurrency exchanges a seat at the table of mainstream finance if they can be seen to be trusted parties in the global financial system.

While cryptocurrencies have a reputation for being a conduit for the proceeds of crime, regulation is actually quite strict for the larger exchanges, which require government identification when signing up and often have to submit to “know-your-client” checks if moving larger amounts of money.

Cash is usually transferred to crypto accounts from traditional banks, meaning there is an extra layer of compliance for anyone wanting to use their crypto assets for illicit activity.

Binance said this week it will donate $10 million through its charitable foundation to help Ukraine, to be divided among non-profit organizations, including UNICEF.