CEXs refuse blanket asset freeze of all Russian users, though questions linger

  • March 4, 2022

If Western sanctions ramp up, CEXs may be forced to ban all Russian users from using their services, as they have previous done in Iran.

Centralized exchanges (CEX) and CEOs from companies such as Binance, Coinbase and Kraken have all stated they would only freeze the assets of Russian clients specifically targeted by Western sanctions — not that of everyday Russian users.

A few days prior, Mykhailo Fedorov, Ukraine’s minister of digital transformation, had called for “all major crypto exchanges to block [wallet] addresses of Russians” and “also to sabotage ordinary users [by freezing their assets].” In explaining why he was not preemptively banning all Russians (though, Coinbase is not available in Russia), Brian Armstrong, CEO of Coinbase, specifically wrote: 

“We believe everyone deserves access to basic financial services unless the law says otherwise. Some ordinary Russians are using crypto as a lifeline now that their currency has collapsed. Many of them likely oppose what their country is doing, and a ban would hurt them, too.”

However, Armstrong also said that “if the U.S. government decides to impose a ban, we will of course follow those laws.” The sentiments of this statement were echoed by Kraken CEO Jesse Powell, who stated: 

“Kraken cannot freeze the accounts of our Russian clients without a legal requirement to do so. Russians should be aware that such a requirement could be imminent.”

Unsanctioned individuals appear to be feeling the effects of sanctions even so. The day prior, Binance announced that cardholders of sanctioned Russian banks would not be able to use them on its platform. On Friday, Redditor u/Sammy12xyz raised the issue Iranian crypto enthusiasts face amid calls for CEXs to crackd own on Russian customers, claiming: 

“It’s already happened to Iranian accounts. We’ve been blocked out of Binance for two years, and no one’s said shit. Are we not innocent?”

Despite such sanctions, it appears there are several, albeit limited, ways to circumvent them. As one KuCoin moderator wrote:

“Users from Iran can use our exchange, but KYC [Know Your Customer] is not supported. If you wish to proceed without doing KYC, you may still perform all functions on our exchange as normal, even if you are not verified. However, there will be a withdrawal limit of 5 BTC per 24 hours for unverified accounts.”

In addition, CEX bans on Iranian IP addresses can be allegedly bypassed with VPNs. Although one Iranian crypto enthusiast Cointelegraph spoke to claimed that cryptocurrencies such as Bitcoin (BTC) are needed in the first place to purchase VPNs in Iran, as such services do not accept fiat payments from Iranians due to sanctions.