According to its CEO, one of the largest cryptocurrency exchanges in the world will not close Russian accounts unless ordered to do so by the State Department.
Kraken CEO and co-founder Jesse Powell said the San Francisco-based company adheres to legal sanctioning requirements and works with law enforcement to ensure banned accounts don’t pass between the cracks. But outright bans are unfair to average Russians, who might not support the country’s invasion of Ukraine, Powell said.
“It’s quite an extreme measure, and it’s way beyond disabling someone’s access to their music streaming service or their photo-sharing app,” Kraken’s CEO told Crypto. CNBC World in an interview. “Blocking someone’s financial access is something we take very seriously.”
The United States, United Kingdom and European Union have announced waves of sanctions against Russia to pressure President Vladimir Putin to back down from an attack on Ukraine. This includes excluding the country from the widely used global payment communication system, SWIFT. Visa, Mastercard, major banks and other conglomerates such as Nike and Apple have stopped doing business in Russia.
Despite the restrictions, payment companies are still technically allowed to operate there, as long as the accounts do not appear on a sanctions list. If U.S. and NATO allies go further with nationwide bans, like those on North Korea and Iran, Powell said the exchange would pivot and shut things down.
“When we are required to do so by law, we will freeze accounts,” he said. “But when it comes to sanctions against individuals, we haven’t seen that work very well…once you freeze someone’s financial account, they’re no longer able to pay their rent, pay his debts, buy food and support his family.”
Jesse Powell, CEO of cryptocurrency exchange Kraken, poses for a photo at the company’s office in San Francisco in 2014.
David Paul Morris | Bloomberg via Getty Images
Ukrainian officials have urged the industry to intervene. Deputy Prime Minister Mykhailo Fedorov tweeted a call for all major crypto exchanges to block addresses, and said “it is” crucial to not only freeze addresses linked to Russian and Belarusian politicians, but also to sabotage users ordinary.”
Kraken’s competitors Binance, Coinbase and FTX also still operate in Russia and, according to data firm Kakio, have seen more activity in Eastern Europe since the dispute began. Transactions in Russian ruble and Ukrainian hryvnia hit their highest level in months, suggesting an increase in demand amid the dispute, according to Kaiko data.
A Binance spokesperson said the exchange “will not unilaterally freeze millions of innocent user accounts,” but will block the accounts of anyone on sanctions lists, while “ensuring that all sanctions are fully respected,” the spokesperson said.
Coinbase CEO Brian Armstrong said something similar on Thursday evening and explained that the exchange does not “preemptively” ban all Russians from the platform.
“We believe that everyone deserves access to basic financial services unless the law provides otherwise,” Armstrong tweeted, adding that if the US government decides to impose a ban, “we will of course follow these laws”.
Some members of Congress have flagged the possibility of Russia using cryptocurrencies to circumvent sanctions. Elizabeth Warren and three other Senate Democrats wrote a letter to the Treasury Department asking for an explanation of how they monitor the industry and its potential to mitigate sanctions enforcement.
The industry also pushed back on this. Kraken’s Jesse Powell said it was a “misunderstanding” by those in Washington who “don’t understand how cryptocurrency works” and “don’t understand how big the space is.” already regulated”.
“They have this perspective from ten years ago, when it was a very nascent technology,” Powell said. “It’s a heavily regulated and very traceable industry. Politicians haven’t figured out where we really stand, and they have an outdated view of the big picture.”
— CNBC’s Arjun Kharpal contributed reporting.