Although some well-known exchanges have stopped operating in Russia, other platforms continue to provide regular services in the country. However, sanctions against Russia have become more stringent recently.
EU legislators announced they would prohibit Russians and EU nationals from transferring or receiving cryptocurrency payments across international borders. The European Union’s recent crypto-related penalties will probably encourage the growth of the nation’s digital asset industry. Let’s look at more details and the effects of these sanctions on Russian clients.
The Reason behind the New EU Sanctions
All crypto wallets, deposits, or custody services, regardless of the amount of the wallet, are now prohibited, as per a press statement posted on the website of the European Commission. This tightens the already-existing prohibitions on crypto assets.
The tougher sanctions are meant to penalize Russia for its ongoing unlawful military campaign against Ukraine, which has seen it mobilize more troops and issue outright nuclear threats.
Cryptocurrencies, notably the stablecoin USDT, were used by Russians to send money abroad after MasterCard and Visa departed the Russian market in 2022. Certain banks also seized their operations in the country.
Due to the EU’s sanctions, many well-known cryptocurrency exchanges in the region, including LocalBitcoins and Blockchain.com, issued emails to their customers warning them that they would not be able to continue using their services and urging them to withdraw their deposits immediately.
Russia accounted for 8% of all cryptocurrency trades via LocalBitcoins in September 2022, making it the exchange’s single-largest market for users. Russian consumers also accounted for little under 20% of all BTC transacted on the exchange before the shutdown.
What Are The Effects Of The Ban?
Ajay Dhingra, the head of research and analytics for a cryptocurrency exchange Unizen, adopted a broader global perspective on the matter and noted that one of the key applications of digital assets is to assist citizens of a nation at war in protecting their savings.
He added that some financial firms and Russian retailers would suffer due to the ban. Considering that the value of BTC spiked when the conflict started, European authorities noticed this gap in their plan to restrain Russia.
According to Przemysław Kral, the CEO of Zonda, the EU’s Markets in Crypto-Assets regulation, the sanctions could alter the crypto scene in the region. He also said exchanges must follow the new EU regulations to avoid legal issues.
Decentralized exchanges, in which crypto assets are sold via smart contracts, and there is no centralized intermediary between the buyer and the seller, will still be accessible to Russian customers despite EU restrictions. Such exchanges cannot monitor user transactions and do not keep track of customer funds or crypto wallet credentials.
Russian traders can switch to cryptocurrency exchanges like Huobi, FTX, and Bybit in case of a ban. However, if a website is focused on the European market, it will probably have to decide between supporting sanctions and avoiding issues in the European Union or keeping its Russian clientele. As a result, it is advised that investors avoid holding sizable quantities on centralized exchanges, particularly if the account is connected to a Russian passport.
Overall, it will be interesting to watch how crypto firms operating in the region adjust to new and changing geopolitical realities as the conflict between Russia and Ukraine continues.