Which page are you on? The Ukrainian-Russian war forces people to answer this question. For some in the crypto community, this can be uncomfortable, because if a person or project stands on the side of the West against Russia, it also means that they are bound by sanctions. It can be difficult to link this to the supposed decentralized crypto/blockchain system and its claims of being borderless, unsupervised and distributed.
Take OpenSea, an NFT marketplace that’s not really a decentralized project, but it’s often referred to as such. “OpenSea is a peer-to-peer decentralized marketplace for buying, selling and trading rare digital commodities,” according to CoinMarketCap, for example.
But when OpenSea recently banned Iranian users from using the NFT trading platform, saying it only complies with US sanctions laws, it sparked outrage from some NFT faucets. Documentary photographer Hashyar Sharif tweeted:
In this regard, the question arises: is the public and the authorities now more focused on regulating cryptocurrency, especially with the outbreak of the war between Russia and Ukraine? OpenSea upset many in its community by banning Iranian users, but did it have a choice?
Also, while large US crypto-related companies such as FTX, Coinbase, OpenSea, and Consensys must comply with US sanctions and regulations, what about decentralized projects without easily recognizable national headquarters, managers, or affiliation? Can they or can they also notice it, or will they miss it?
Finally, there is a long-term question: Will we really have a decentralized market? Won’t cryptocurrencies inevitably have to compromise at least to some degree with central institutions such as sovereign governments?
More attention from the organizers
“Recently, government agencies have certainly been more interested in regulating crypto,” Swan.com CEO Cory Klebstein said in response to a question about recent events, adding that serious discussions about regulation have been going on for many years. “The Russian-Ukrainian war continues to draw attention to cryptocurrency, which is why we are seeing increased public interest in these developments in the area of crypto regulation.”
“Everyone is starting to reconsider the importance of compliance and encryption for various reasons,” Carlos Domingo, founder and CEO of Securitize, told Cointelegraph. “We see the importance and effectiveness of sanctions right now” in the context of the war.
US regulators are putting pressure on the biggest players in the crypto space to comply. “And now some decentralized crypto platforms,” Marcus Hammer, attorney and president of consultancy firm Hammer Execution, told Cointelegraph. This may be the reason why OpenSea took a hard line against Iranian users last week despite the reimposition of Iranian sanctions in 2020.
“Because new rules seem inevitable, companies like OpenSea are trying to protect themselves by making sure that they comply with all potential rules that might come up during development,” Clippsten said, adding, “That’s why you see that they are off-limits to the Iranians. Cointelegraph requested comment from OpenSea on these the story but did not receive a response.
Will there be more projects like Binance or FTX that have been vague about their geographical location and are now clear where they are? Will others, like last week’s OpenSea, say “we are an American company” that should “comply with US penal code”?
“I’m not sure if OpenSea tried to hide its location,” Domingo replied. “Most people knew that the CEO and the other employees were in New York.” He also added to the record: “I don’t consider OpenSea a decentralized project at all. I think it’s just as decentralized as Coinbase, Binance, and FTX.
Instead, what we see now is that more and more “regulators are concerned about fraud and illegal acts committed against their citizens and businesses, and are increasingly willing to take enforcement action anywhere in the world, as in the case of BitMEX.” in Domingo.
However, many in the crypto community see OpenSea’s actions as treachery – after all, projects based on blockchain should be free from censorship. Was it fair that an Iranian artist, unrelated to government actions, be denied a platform to sell his digital art?
“OpenSea must comply with US sanctions rules and laws, just like all other US central companies,” Clippsten said. “On the other hand, there is no leader for a decentralized project like Bitcoin and it is not really authorized. Users cannot be excluded or complied with.