One of the first punitive measures taken against Russia in response to the military invasion of Ukraine was the imposition of economic sanctions aimed at isolating the country from the international financial system. On March 12, Russian banks lost access to the international payments and messaging network SWIFT, and private payment companies like Visa, PayPal and Mastercard were close behind. But while these heavily regulated and publicly controlled organizations responded swiftly to the crisis, concerns quickly grew that the Russian state and related companies and oligarchs could use digital currency exchanges as a backdoor to evade sanctions.
In the UK, the Bank of England and the Financial Conduct Authority called on crypto firms to enforce sanctions on their platforms, and central banks and regulators around the world have since joined in this chorus of concern. Japan recently announced that it would revise its foreign exchange and foreign trade law. This aims to broaden their breadth to apply to crypto assets, meaning exchanges need to assess whether their clients are Russian sanctions targets.
And yet, some of the best-known crypto exchanges are still lagging and hesitant to follow the line being drawn by global policymakers and regulators. Binance, the world’s largest exchange, as well as Coinbase and Kraken have all shown empathy for the plight of Ukrainians and some have frozen accounts related to sanctioned individuals, but they have all stopped leaving Russia or blocking any money flowing into it and out of the country.
Related: Every Bitcoin Helps: Crypto-Powered Aid to Ukraine
As the CEO of Poland’s largest cryptocurrency exchange, I understand the moral dilemma they face, torn between free market ideals and a sense of moral duty, but as this devastating human tragedy unfolds in Eastern Europe, we as an industry need more do Condemn the violence by accessing our platforms. At Zonda, we didn’t take the decision to withdraw from Russia lightly, but we made it quickly, voting for peace, transparency and respect for the spirit of global regulation. A failure to do so will be viewed by many around the world as at best indifference or at worst active support.
Cryptocurrency exchanges are at a moral crossroads
The Ukraine conflict has exposed tension at the ideological core of cryptocurrency. Digital currencies were originally conceived with the vision of creating a decentralized global financial system free from financial manipulation by governments, central banks and large financial services companies. And yes, there are many reasons why we should explore decentralization, not the least of which is the pursuit of greater transparency, accountability, and security. But we must not allow this quest for the purest form of financial independence to lead us down a dark path where we believe the laws of the land – moral or otherwise – do not apply to us. Ideological support for decentralization can never justify deliberately promoting criminal activity.
We as an industry should ask ourselves what kind of world we want to create and let our morality guide us. Russia’s invasion of Ukraine is an undeniable violation of international law, and the indiscriminate attacks on Ukrainian civilians in places like Mariupol are not an ethical gray area.
Related: “I’ve never paid with crypto”: How digital assets are making a difference in the midst of war
The risk of greater exclusion
The current crisis requires a concerted collaborative response from every corner of every industry and provides a rare window for the global crypto sector to stand together and take unified action. The crypto-asset industry should do more to show that it takes the activities happening under its umbrella seriously. This could include freezing Russian and Belarusian user accounts and denying requests for new accounts from consumers in those regions. In fact, I believe this is our best chance to shatter some of the criminal connotations that continue to plague our industry.
Bitcoin (BTC) price has skyrocketed in recent years, and a big driver of this has been its greater integration into the broader financial services industry. If you don’t read the space on this crisis, you risk jeopardizing the trust that the crypto industry has built among regulators, policymakers, and consumers over the past few years. She would signal to these stakeholders that she sees herself completely removed from her tasks, even from the real world.
Of course, commercial factors also play a role here. Companies that demonstrate a shared sense of purpose and moral value to their customers enjoy 14.1% higher revenue growth and 34.7% higher annualized total shareholder returns. The crypto sector is no exception, and as the war in Ukraine rages on, those who failed to act quickly to support the victims will be remembered.
Related: Crypto offers Russia no way out of Western sanctions
Could regulation be the answer?
The Financial Stability Board announced in February that it would develop a global regulatory framework for crypto assets, the first significant step towards internationally unified guidelines. At the same time, the United States Securities and Exchange Committee launched a plan to regulate alternative trading systems that would allow regulators to scrutinize crypto platforms and even decentralized finance protocols.
There is currently no indication that these regulations will mandate economic sanctions measures, but they will introduce further checks and balances that will add more transparency to the money flowing through digital asset exchanges and further deter illegal activity. But it’s no secret that regulators are keeping up with the rapid pace of innovation in the crypto space, and we shouldn’t wait for them to catch up to do the right thing. It’s up to us to carry on the industry reputation torch we all love.
This article does not contain any investment advice or recommendation. Every investment and trading move involves risk and readers should do their own research when making a decision.
The views, thoughts, and opinions expressed herein are solely those of the author and do not necessarily reflect or represent the views and opinions of Cointelegraph.
Przemyslav Kral is CEO of Zonda (formerly BitBay) and member of the Board of Directors. Previously, Przemysław was BitBay’s Chief Legal Officer. He played a key role in Zonda’s strategic business development, including regulatory approvals in Canada and Estonia. Przemysław has over 20 years of legal experience and is a member of the British Bar Council’s Foreign Lawyers’ Association.
https://cointelegraph.com/news/for-the-crypto-industry-supporting-sanctions-is-an-opportunity-to-rebrand For the crypto industry, sanctions support is a rebranding opportunity