Key takeaways:
- Coinbase has blocked thousands of Russian crypto addresses following an internal investigation
- The addresses were not added to the blacklist as a direct result of Russia’s attack on Ukraine, but a product of a multi-year investigation
- Major cryptocurrency exchanges are against unilaterally freezing digital holdings of ordinary Russians
Coinbase blocks more than 25,000 Russia-linked wallets engaging in illicit activity
Coinbase has placed more than 25,000 blockchain addresses linked to Russian individuals and businesses on its internal blacklist. In a Monday’s blog post, the publicly-traded exchange’s Chief Legal Officer Paul Grewal wrote that the blacklisting doesn’t come as a direct result of Russia’s war with Ukraine, but rather as a result of multi-year efforts to curb illicit activity.
Grewal noted that, for the most part, blockchain technology provides an easier way of identifying financial wrongdoings than traditional money. The CLO credited the public and permanent characteristics of distributed ledger transactions as the main factor for greater traceability.
While the total number of newly-blocked addresses is certainly high, it is not directly related to the number of individuals engaging in illegal acts. As Grewal noted, a single individual can have numerous crypto accounts.
When the US authorities sanctioned a Russian national two years ago, Coinbase received three blockchain addresses associated with the said individual; however, the number skyrocketed to over 1,000 once a thorough analysis had been made. “Through advanced blockchain analysis, we proactively identified over 1,200 additional addresses potentially associated with the sanctioned individual,” wrote Grewal.
Cryptocurrency exchanges oppose a blanket ban on Russian citizens
In light of Russia’s attack on Ukraine, the US and its allies enacted strict economic sanctions in hopes of shortening the conflict. A number of Russian financial institutions were cut off from the global SWIFT inter-bank system. At the same time, Visa and Mastercard as well as numerous other businesses decided to limit their services or entirely withdraw from the Russian market.
Leading cryptocurrency exchanges have so far pursued a similar stance when it comes to Russia – blocking sanctioned individuals and businesses while not unilaterally blocking access for ordinary citizens.
Case in point, CEO and co-founder of Kraken Jesse Powell vehemently opposes sanctioning regular Russians and believes such measures could have counterproductive effects. CEO and founder of the world’s largest cryptocurrency exchange Binance, Changpeng Zhao, echoed a similar stance in last Friday’s blog post. “We don’t think it is right for businesses or platforms to unilaterally decide to freeze populations of users’ assets,” wrote Zhao.
