Crypto Exchanges Are Allowing Sanctioned Russian Banks Access, Report Says

By: Hannah Miller
From: Bloomberg

Two major crypto exchanges still allow customers of sanctioned Russian banks to transact on their platforms, according to a report from digital asset data analytics firm Inca Digital.

Huobi and KuCoin enable people to trade crypto using debit cards issued by sanctioned Russian banks like Sberbank, the report found. Inca Digital Chief Executive Officer Adam Zarazinski said in an interview that this could be a violation of US and European sanctions and that the transactions often involve Tether, a stablecoin that has faced its own scrutiny from regulators.

“Tether is frequently used by Russians to move money out of the country,” he said. “It is absolutely used by these two exchanges in particular to provide crypto banking services to sanctioned Russian banks.”

Huobi advisor Justin Sun did not immediately return requests for comment regarding the report. Representatives of KuCoin and Tether also didn’t immediately respond to separate requests for comment.

Binance, the world’s largest cryptocurrency exchange, is also mentioned prominently in the report. The exchange offers “multiple methods for Russians to convert local currency into crypto,” including via their over-the-counter trading desk and a peer-to-peer marketplace, the report said. Each of these options are open to Russians without know-your-customer checks for up to a $10,000, the report said.

Chagri Poyraz, Binance’s global head of sanctions, said in a statement to Bloomberg News that the exchange is “a full-KYC platform and was the first major exchange to implement EU crypto-related sanctions.”

“There will be always users with bad intent that try and circumvent even the most advanced controls and which is why we have gone above and beyond what is required to respond in this dynamic environment,” Poyraz said. “Our P2P team takes the extraordinary added step of filtering any forms of communication between users to ensure there is absolutely no potential nexus with Russian entities through any sort of workaround. Considering the low value and low volume of transactions in P2P, it is not practical to evade sanctions with these products, and now we have tamped down on even the most creative attempts to circumvent these controls.”

Binance, which said it doesn’t have a centralized headquarters, has been subject to numbers investigations worldwide. In the US, Binance has been probed by the Securities and Exchange Commission, Commodity Futures Trading Commission, Justice Department and the Internal Revenue Service.

Zarazinski said the Inca plans to release the report publicly soon, noting that it is the one-year anniversary of the Russian invasion of Ukraine. The report included other troubling observations about the 62 crypto exchanges it analyzed, including that some of them do not require Russians to pass KYC checks.

“We want crypto to not just survive all the stuff that’s happened recently, but thrive,” he said. “But we also want to fend off bad actors and grow the industry responsibly.”