These cryptocurrency exchanges are not complying with sanctions against Russia.

Since Russia invaded Ukrainian territory over a year ago, sanctions have been imposed on trade with the federation. These sanctions apply to almost the entire Western world, including cryptocurrency exchanges.

According to research by blockchain analysis firm Inca Digital, Huobi and KuCoin are not complying with the sanctions imposed on Russia. Both exchanges are based in Seychelles.

Russians use Tether on Huobi and KuCoin

Inca Digital revealed that the two major international exchanges have not taken action to prevent Russian banks subject to sanctions from using their networks.

This was reported by the online magazine Politicon, which conducted an interview with Adam Zarazinski, managing director of Inca Digital. He said that these "prohibited" transactions often use the stablecoin Tether (USDT). The fact that Huobi and Kucoin allow these transactions to take place constitutes a violation of US and European restrictions, Zarazinski said.

Circumventing sanctions through cryptocurrencies

According to the article, Russian bank cards are being used on two cryptocurrency exchanges. The US newspaper Bloomberg quotes Zarazinski:

"Tether is often used by Russians to move money out of the country. It is definitely being used by these two exchanges, especially to provide cryptocurrency banking services to Russian banks subject to sanctions. We want cryptocurrencies to not only survive everything that has happened lately, but to flourish...but we also want to fend off bad actors and develop the industry in a responsible way."

A year after the Russian invasion of Ukraine, reports continue to emerge showing that sanctions are not 100% effective. It is mainly Europe and the United States that are working to keep Russian institutions and oligarchs out of the global financial system.

Binance denies allegations

The Politico report also highlights flaws in Binance's policy. The company allegedly offers Russian users "various ways" to purchase cryptocurrencies on its exchange. However, Binance claims otherwise. The exchange restricted deposits from Russian payment cards in March 2022.

According to a spokesperson for the platform, it is strict in complying with Know-Your-Customer (KYC) regulations. He also mentioned ByBit, a cryptocurrency exchange based in Singapore, which allows the conversion of Russian rubles into cryptocurrencies.

The sanctions list should be sufficient

Jake Chervinsky, a policy maker at The Blockchain Association, explained how sanctions work in the US:

"In the US, the Office of Foreign Assets Control designates specific targets for sanctions, such as individuals, companies, and governments. They are listed in the Specially Designated Nationals and Blocked Persons list. Conducting transactions with such a person is illegal for any person in the US."

Chervensky added that it doesn't matter whether someone is using dollars, gold, shells, or Bitcoin.

"There is no reason to think that the existence of cryptocurrencies will persuade anyone to knowingly violate sanctions, risking fines or imprisonment."

In the EU, we have a similar list called the Financial Sanctions Database - FSF Platform. Conducting transactions with anyone on this list is also illegal in the EU. But that's theory. The reality is quite different.