In the nine months of conflict between Ukraine and Russia, sanctions against the latter continue to grow at an aggressive pace. This time, EU lawmakers have announced that they are introducing a complete ban on all cross-border cryptocurrency payments between Russia and its citizens.
To clarify, the ban on all “cryptoactive wallets, accounts or custody services, regardless of the wallet amount,” has now been initiated by the EU in response to Russia’s ongoing annexation of Ukrainian land, repeated troop mobilizations in the country, and the threat of nuclear escalation.
It is worth noting that previous sanctions have limited crypto payments between Russian wallets in the EU to 10,000 euros ($9,700). The new ban aims to strip the Kremlin of its military power and cut back on critical components of the industrial complex.
Russian crypto users under fire from all sides
In light of the aforementioned EU sanctions, a number of popular crypto exchanges in the region, including LocalBitcoins, Crypto.com and Blockchain.com, have sent out emails to their customers asking them to withdraw their funds as soon as possible, as they won’t be able to do that. use their services in the future.
It is worth considering that as of September 2022, LocalBitcoins accounted for a whopping 8% of cryptocurrency trading volume in Russia, which is by far the exchange’s largest customer base. Also, before the ban, Russian users were responsible for just under 20% of all BTC trading volumes on the exchange.
Binance, one of the largest crypto exchanges in the world, is also working to implement new restrictions. However, a spokesperson for the firm told Cointelegraph that these changes may take some time to be implemented as there is no set date for them. Similarly, Bitfinex, an exchange that has previously spoken out against increasing sanctions against Russian citizens, recently reversed its stance, saying it may have to change its policy if they follow “the regulators’ lead”.
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Finally, earlier this month, popular blockchain developer Dapper Labs suspended Russian citizens’ access to a wide range of digital asset services. As a result, users from this part of the world will no longer be able to access the firm’s popular NFT marketplace along with several other crypto products.
Consequences of the ban
To better understand the situation, Cointelegraph contacted Ajay Dhingra, head of research and analysis at cryptocurrency exchange Unizen. Taking a more holistic approach to the matter, he highlighted that one of the most important use cases for digital assets is to help the citizens of a warring country protect their savings, adding:
“The ban will harm Russian retail and some financial institutions. Considering that the price of BTC rose sharply after the start of the war, European authorities drew attention to this loophole in their strategy to contain and stifle Russia.”
Similarly, Przemysław Kral, CEO of Zonda – one of the largest exchanges in Eastern Europe by volume – told Cointelegraph that the sanctions, along with the yet-to-be-completed regulation of EU cryptoasset markets, will be enforced by the EU Financial Authority. The Action Task Force has the potential to redefine the region’s cryptographic landscape for the foreseeable future by adding:
“As the situation escalates, regardless of their personal views on cryptocurrency regulation, the decision of exchanges to comply with the new EU sanctions is a moral and ethical responsibility that all companies should carefully consider.”
What happens to ruble pairs on these exchanges?
In the past, regulators have cracked down on exchanges that continue to allow residents of blacklisted countries to trade on their platforms, prompting the question: what will exchanges with huge ruble trading volumes do with these assets? Dingra said:
“This time they will be careful, given the brevity of the situation. The stock exchanges now have no choice but to suffer huge losses on their balance sheets. However, the ban will bring decentralized finance back into the spotlight as it provides censorship-resistant and easily accessible infrastructure for people living in geopolitical turmoil.”
Kral noted that it is currently unclear whether exchanges will be forced to return money to Russian users, block their access or freeze their accounts until the sanctions are lifted. Finally, he stressed that Zonda closed all Russian accounts during the first round of sanctions back in May, and returned all ruble-denominated assets to their rightful owners.