The crypto exchange Binance is being forced to consider exiting the Russia market following some regulatory issues that have arisen within the United States.
According to a report in the Wall Street Journal, the exchange allegedly helped Russian citizens on several occasions to evade sanctions imposed by Western countries after Putin and his army invaded Ukraine in February 2022.
In response to the allegations, Binance has introduced new measures preventing its Soviet customers from trading currencies other than the ruble on the P2P platform.
See the full details of the news below.
Continued regulatory hurdles in the US prompt crypto exchange Binance to consider exiting the Russia market
Bad news for crypto exchange Binance, which due to increasing regulatory hurdles in the US is seeing an increasingly likely closure of its markets in Russia.
A recent Wall Street Journal article revealed that the world’s largest cryptocurrency exchange platform allegedly facilitated Russian nationals to evade EU sanctions, prompting regulators to investigate a number of suspicious transactions.
According to the news outlet, Binance ahead of numerous lawsuits with US regulators reportedly stated:
“All options are on the table, including a total exit.”
The exchange is reportedly considering a whole range of options, starting with taking preemptive measures to align with international sanctions.
Part of these moves includes narrowing options for Russian customers on the P2P platform where they will now only be able to trade rubles and no longer other types of FIAT currencies.
In January, additional security measures were put in place by Binance, which set Russian accounts with a balance over 10,000 euros to “withdrawal only” mode, in compliance with EU directives.
Last year measures were implemented to block accounts belonging to Elizaveta Peskova, the daughter of Dmitry Peskov, spokesman for Russian leader Vladimir Putin, as well as those of Polina Kovaleva, the stepdaughter of Foreign Minister Sergei Lavrov.
Notably, Kovaleva was also reportedly sanctioned by the United Kingdom and the US Treasury last year.
Despite this whole series of restrictions, in April 2023 Changpeng Zhao and his team had nonetheless reopened the possibility of using credit and debit cards linked to banks in the Russian country to buy cryptocurrencies in a range of currencies, excluding the US dollar.
An exit from Russian territory would certainly hurt Binance’s situation considering that the country is a major source of web traffic for the exchange platform.
As of July 2023, Russia accounted for 6% of all visitors to the exchange, accounting for about 3.4 million users. In many other off-shore marketplaces, the Soviet nation is also confirmed with a very rich market.
Binance exchange accused of facilitating passing of Russia sanctions
The Wall Street Journal in its article published yesterday discussed the efforts of the crypto exchange Binance in helping Russia get past international sanctions imposed by the European Union and the United States.
The New York newspaper’s harsh words come after the US Department of Justice investigated the exchange platform’s suspicious operations.
Binance now finds itself in the crosshairs of regulators, with the Commodities Futures Trading Commission suing the company in March and the Securities and Exchange Commission suing Changpeng Zhao and his empire for violating securities laws in June.
After Russia invaded Ukraine in February last year, with the introduction of international sanction measures, Binance said it restricted trading in Russia.
However, the crypto exchange continues to handle significant volumes of ruble exchanges and provide alternative solutions for Russian citizens who wish to turn sanctioned bank funds into cryptocurrency balances.
In particular, a close partnership with Advcash, an on-ramp fiat site with which Russian customers can use funds from ruble-denominated accounts at banks such as Rosbank and Sberbank (sanctioned banks) to deposit on Binance, has reportedly alerted US regulators.
In any case, according to the Bank of Russia, the preferred route for Russians to convert rubles to cryptocurrency has been through peer-to-peer services.
From October to March, Russians conducted transactions worth about $428 million each month.
According to CCData‘s data, the exchange has recently seen a decline in volumes in Russia after peaking in early 2022 with the sanctions outbreak, though followed by a slight increase in recent months.
A total of $8 billion in ruble-to-cryptocurrency transactions were handled in July, mainly for the USDT stablecoin.
A Russian businesswoman, Tatiana Maksimenko, who runs a Montenegro-based marketing agency explicitly stated that in Russia “everyone uses cryptocurrencies, except maybe my grandmother” implying that the high trading volumes are justified by Binance’s popularity in the country.
A spokesman for the exchange to defend itself against the accusations of the various US state bodies said that:
“Binance follows global sanctions rules and applies sanctions to people, organizations, entities and countries that have been blacklisted by the international community, denying such actors access to the platform.”
Restrictions for Russian users on Binance’s P2P platform
Before exiting Russia completely, the crypto exchange Binance is implementing a number of compliance measures in an attempt to gain the grace of US regulators.
The most important move undertaken recently was the restriction of transactions on the P2P platform for Russian citizens, where high volumes of trading usually occur.
In detail, for Soviet residents, it is prohibited to use currencies other than the Ruble, and in order to access the exchange’s services, it is necessary to have a KYC-verified account and to simultaneously reside in Russia.
In contrast, for Russian customers residing outside the country there is a strict ban on using currencies such as ruble, euro, US dollar and Ukrainian hryvnia.
The world’s largest crypto exchange company justified itself to its Russian stakeholders by simply saying,
“We apologize for the inconvenience.”
According to several comments on the Telegram channel where this ban was announced, those most affected by the affair are Russian citizens residing in other countries since they need to convert their rubles from Russian banks into other currencies.
While they used to be able to rely on Binance’s convenient peer-to-peer service, now they cannot.
In detail, one user reportedly found it difficult to purchase Tether‘s stablecoin with rubles present in the Russian bank Tinkoff in order to transfer his Russian pay to Switzerland.
Another user commented on the Russian national’s discomfort this way:
“If you are in Switzerland, you should take your pay in francs.”
Another customer of the platform who lives in Kazakhstan also reported difficulties after 25 August in transferring rubles from the Russian Federation to buy USDT and reselling them later in the Kazakh tenge.
Although the international sanctions against Russia have been carried out with a view to harming Putin and his army, it is evident that those losing out are the innocent Russian citizens living abroad who wish to lead peaceful lives free of violence and crime.