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Ukrainians and Russians flock to cryptocurrencies amid deepening economic crisis

In economic retaliation against Russia’s aggression, many fintech companies have suspended their operations in Russia, including Mastercard, Visa, PayPal, Revolut, and other payment-focused firms. The US and EU cut off major Russian banks from the SWIFT interbank settlement system and froze Russian central bank’s foreign reserves.

Russian stocks have been de-listed from US and UK stock exchanges, allowing investors to only sell their assets. Due to brokers relationships, investors were not able to buy Russian stocks even in China or Hong Kong, where such stocks haven’t been suspended. As a result, some Russian stocks were down more than 90% with tech giant Yandex being the first one to publicly warn about the risk of default.

Amid on-going economic crisis, the interest in cryptocurrencies has skyrocketed in both war-torn nations as people are afraid that their banking systems might collapse. As Bitcoin overtook the nosediving Russian ruble by market capitalization, the Kremlin urged multinational Russian businesses to convert a big portion of their reserve liquidity to the ruble in order to stabilize the exchange rate.

While some politicians used the situation to push their anti-crypto agenda pointing out that censorship-resistant digital assets can help the Russian government evade economic sanctions, the Ukrainians raised over $50 million in crypto donations, including a CryptoPunk NFT worth around $200,000.

Polkadot founder Gavin Wood has donated $5.8 million after the official Ukrainian Twitter account posted a Polkadot address on his request. Decentralized exchange Uniswap launched an interface on its website that converts ERC-20 tokens into ETH and sends funds directly to the official crypto wallet addresses shared by the Ukrainian government in a single transaction.

Since crypto is completely neutral, it can be used by both Ukrainian and Russian governments to achieve their goals.


Major crypto exchanges refuse to blanket ban all Russian users

Ukrainian officials have requested cryptocurrency exchanges around the world to freeze all Russian accounts in order to ensure that the imposed sanctions are properly enforced, which sparked debates over ethics of such a decision, and once again highlighted the fact that most investors still use centralized custodial solutions to store their crypto assets.

At the moment of writing, major crypto exchanges didn’t blanket ban Russian accounts. However, usually neutral Singapore and Switzerland announced plans to freeze crypto assets owned by Russian citizens and businesses within their borders, and several South Korean exchanges started blocking Russian IP addresses.

The largest crypto exchange by trading volume Binance donated $10 million towards assisting in the Ukrainian humanitarian relief efforts, but its CEO said that banning all Russian accounts would be unethical. However, some Binance users reported that fiat deposits via certain Russian-issued bank cards were at least temporary not accepted.

US-based exchange Coinbase said that it doesn’t have plans to preemptively block all Russian accounts, but the company will comply with the law if the US government decides to impose such a ban. A few days later the exchange announced that it blocked 25,000 accounts linked to Russia.

The CEO of another US-based crypto exchange Kraken refused to freeze all Russian accounts, adding that if their business model included freezing assets of residents of countries that unjustly attack other sovereign nations, then the US accounts would be first in line.

It’s worth mentioning that denying Russians an access to crypto trading won’t be something unprecedented as many centralized exchanges have been long denying services to various nations with Americans and Iranians being probably the most affected ones.

That said, sanctions have long been used against civilians as a weapon to turn citizens against their government’s policies and it seems like many politicians are now more than ever determined to crackdown on crypto due to its censorship-resistant nature.

In other news

  • Web3 signer MetaMask and Ethereum blockchain’s API provider Infura were caught georestricting Venezuela’s users. The MetaMask team has later explained that the wallet relies on Infura, which misconfigured the settings more broadly when changing configurations due to the new sanctions directives from the US and other jurisdictions. Both platforms are owned by US-based company ConsenSys AG (CAG).

  • In attempt to attract more crypto companies on its soil, Switzerland’s city Lugano has announced it will recognize Bitcoin (BTC), Tether’s stablecoin USDT, and Lugano’s LGVA token as de-facto currencies, making them legal tender.

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