One of the first punitive measures taken against Russia in response to the military invasion of Ukraine was the application of economic sanctions aimed at isolating the country from the international financial system.. On March 12, Russian banks lost access to the international payment and messaging network SWIFT, with private sector payment companies such as Visa, PayPal and Mastercard following closely behind. But although these organizations, highly regulated and subject to public scrutiny, reacted quickly to the crisis, Concerns soon grew that the Russian state, as well as companies and oligarchs associated with it, might turn to digital currency exchanges as an escape plan to evade sanctions..
In the UK, the Bank of England and the Financial Conduct Authority have asked crypto companies to apply sanctions on their platforms., and since then central banks and regulators around the world have joined in on this concern. Recently, Japan announced that it would review its Foreign Trade and Exchange Law. The goal is to broaden its scope, so that it applies to crypto assets, which means that exchanges will have to assess whether their clients are targets of Russian sanctions.
Nevertheless, some of the most well-known exchanges remain unanswered, unwilling to toe the line drawn by global politicians and regulators. Binance, the world’s largest exchange, as well as Coinbase and Kraken, have shown empathy for the plight of Ukrainians, with some freezing accounts linked to sanctioned individuals, but everyone has stopped when it comes to leaving Russia or blocking all money flows to and from the country.
As the CEO of the largest cryptocurrency exchange in Poland, I understand the moral dilemma they face, torn between free market ideals and a sense of moral dutybut as this devastating human tragedy unfolds in Eastern Europe, we, as an industry, we must do more to condemn violence through access to our platforms. At Zonda, we did not take the decision to withdraw from Russia lightly, but we did so quickly, and in doing so we voted for peace, transparency and respect for the spirit of global regulation. Failure to do so will be seen by many around the world as indifference at best or active support at worst..
Crypto exchanges are at a moral crossroads
The Ukraine conflict has unearthed a tension at the ideological heart of cryptocurrencies. Digital currencies were first thought of with a 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 decentralization is something we should explore, including the search for greater transparency, accountability, and security. But We cannot let this quest for the purest form of financial independence lead us down a dark path, where we believe that the laws of the land – moral or otherwise – do not apply to us.. Ideological support for decentralization can never justify knowingly facilitating criminal activities.
Us, as an industry we should ask ourselves what kind of world we want to create and let our morals guide our actions. The Russian invasion of Ukraine is an undeniable violation of international law and the indiscriminate targeting of Ukrainian civilians, in places like Mariupol, is not an ethical gray area.
The risk of further marginalization
The current crisis calls for a united collaborative response from all corners of the industry and offers a unique opportunity for the global crypto industry to stand together and take unified action.. The crypto industry should do more to show that it is serious about the activity taking place under its roof. This could include freezing the accounts of Russian and Belarusian users, and denying requests for new accounts from consumers in these regions. In fact, I think this is the best chance we have to shake off some of the criminal connotations that continue to plague our industry.
The price of bitcoin (BTC) has skyrocketed in the last two years, and a big driver of this has been increased integration with the broader financial services industry.. If the right decisions are not made in this crisis, risks jeopardizing the trust that the cryptocurrency industry has built in recent years with regulators, policymakers, and consumers. I would point out to these interested parties that she sees herself totally removed from her missions, and indeed from the real world.
Of course, there are also business factors at play. Companies that demonstrate to their customers a shared sense of purpose and moral worth enjoy 14.1% higher revenue growth and 34.7% higher annualized total return to shareholders. The cryptocurrency sector is no exception, and As the war continues in Ukraine, those who did not act quickly to support the victims will be remembered for it..
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 in international homogeneous guidelines. At the same time, the United States Securities and Exchange Committee launched a plan to regulate alternative trading systems, which would allow regulators to dig into cryptocurrency platforms and even decentralized financial protocols.
At the moment, there are no indications that these regulations will impose economic sanctions, but they will introduce more checks and balances that will make money flowing through digital asset exchanges more transparent and will further deter illicit activity. But it’s no secret that regulators are playing catch-up with the rapid pace of innovation in the cryptocurrency space, and we should not wait for them to catch up to do the right thing. It’s up to us to carry the torch for the reputation of the industry we all love.
Przemysław Kral is the CEO of Zonda (formerly BitBay) and is part of its board of directors. Previously, Przemysław was Chief Legal Officer of BitBay. He has played a key role in Zonda’s strategic business development, including its regulatory approval in Canada and Estonia. Przemysław has more than 20 years of experience in the legal field and is a member of the Foreign Lawyers Association of the British Bar Council.
Clarification: The information and/or opinions expressed in this article do not necessarily represent the views or editorial line of Cointelegraph. The information set forth herein should not be taken as financial advice or investment recommendation. All investment and commercial movement involve risks and it is the responsibility of each person to do their due research before making an investment decision.
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