A single crypto regulator to appear in the EU Hotels in Maldives and Thailand accept crypto payments PayPal added bitcoin support to its mobile app Corporations invested more than $6 billion in crypto industry in the last 10 months DeFi-platform Velodrome accuses crypto sleuth of stealing $350k S&P Global dropped Coinbase rating to a speculative level BitGo will seek $100 million for Galaxy Digital refusal to acquire crypto platform Brazilian crypto exchange blocked customer accounts and fired staff Celsius Network’s debts is more his assets for $2,8 billion

Opinion: Cryptocurrency as a circumvention of U.S. sanctions for Russian investors

Opinion: Cryptocurrency as a circumvention of U.S. sanctions for Russian investors

The U.S. is actively urging centralized crypto exchanges to suppress any attempts of the Russian government to circumvent U.S. and EU sanctions. Some had earlier reacted to the call and started blocking Russian miners, traders, and investors. However, separate initiatives and the coordinated actions of most crypto projects will not prevent Russia from circumventing sanctions…  

Editorial note: This article does not represent the opinion of the entire Kravox.com editorial staff. However, we found this article worth your time to read it and form your own conclusions. In case you want to share an original vision of the crypto industry development or a specific project, contact us via e-mail: info@kravox.com

To restrict Russia from cryptocurrencies, it is necessary to deal with many problems, divided roughly into three factors, namely, technological, economic, and political. 


How is it possible to detect Russians in crypto projects? The simplest way is via IP-addresses. That's what one of the largest pools of Ethereum miners, FlexPoll did the other day, just stopped serving them. However, what prevents Russian miners from using proxy or VPN and reconnecting to the pools? Of course, it is possible to compare the equipment hashrates of disconnected users and those trying to re-enter the pool, if needed. This will help identify some shortsighted miners, but it will require the pools to spend time and effort to verify each new connection. Older miners can simply connect to another pool, making them virtually invulnerable to verification. 

It is possible to limit traders' work with the KYC identification method, especially on centralized exchanges. But it will simply lead to an outflow of trades to decentralized exchanges or to those where it is easy to cheat KYC (this can be done in most crypto exchanges, and they are now struggling with each other for clients).

It is even more complicated with investors: how can you catch a person and limit his access to cryptocurrency if he doesn't have a custodial wallet? Well, in theory, it is possible only when transferring cryptocurrencies to Russian bank accounts. However, due to the partial SWIFT cutoff, sanctions against Russian banks, and ruble devaluation, many investors are not eager to cash out their savings. They are right in thinking that their savings will be much better preserved in cryptocurrency. Still, even if someone decides to withdraw money to a bank account, it will be very difficult to verify whether the investor is transferring money to his account or just selling something to a buyer from Russia.  

Thus, it is impossible to limit the Russians and the Russian authorities technologically from the crypto industry. In case you still don't believe it, check out the UN report on how the DPRK steals cryptocurrency and uses it to finance its missile program. And don't forget that they are in international isolation…  


Today, the main digital assets are cryptocurrencies, tokens, and NFTs. Meanwhile, freezing or blocking NFTs (as well as some types of tokens) will hardly lead to any serious consequences, removing cryptocurrencies from circulation can create a serious economic crisis in the crypto market. 

For example, let's imagine a situation where a Russian investor invested $1 million in a liquidity pool. What will happen to his money in the liquidity pool if his account and assets are frozen? Let's assume that he deposited them there for a long period of time, so in case of freezing, his funds will remain in the pool account, and interest will be even accrued to him, but he won't be able to use and withdraw them. As long as the war lasts, the liquidity pool will work as usual, but once the war is over and the accounts are unblocked, the Russian investor will try to withdraw all his assets at once (with or without interest, it does not matter. What if there will be another war and the accounts will be blocked again?). This would lead to a sharp loss of the liquidity pool's balance. In the worst case, it may close immediately, and in the best case, it will be forced to replace the withdrawn $1 million quickly. Yet, in reality, this situation will happen not to just one Russian investor but to everyone who can be identified. Although the sudden problems of one liquidity pool or even its liquidation are unlikely to affect the global crypto community, the abrupt withdrawal of all Russian assets after the war will create serious economic problems for all. 

By the way, that's why the option with mass and instant confiscation and closure of Russian crypto accounts is also bad since the situation above will repeat but without a lag in time.

In addition to the dramatic loss of financial assets, the attempt to squeeze Russians out of the crypto industry could also cause technological problems. We don't know the exact number of crypto projects created by Russians, but you all know one famous Russian: Vitalik Buterin, creator of Ethereum. So, if we are going to exclude all Russians, including Vitalik, what happens to Ethereum?  

Political factor

Let's imagine that we have somehow identified all the Russians and their cryptocurrency assets have been frozen. Then the next question would be "What to do with their assets?" If we are certain that the assets belong to the Russian government, we can simply send them to some relief fund in Ukraine. But what to do with the assets of ordinary Russians? There are two options:

  • Leave assets frozen until the war in Ukraine stops
  • Confiscate assets and divert them for humanitarian aid to Ukraine 

In the first case, we will get a delayed economic crisis, which we wrote about above. While in the second case ( in fact, as in the first option), the cryptocurrency credibility will be damaged. Moreover, the trust of not only Russians, but in general all cryptocurrency users will be undermined. Cause when China, the U.S. or any other country starts a war in a couple of years, the assets of the citizens of these countries will also be frozen. This raises a reasonable question: why use cryptocurrencies if they can just as easily be seized from their owners?...  

By the way, the CEO of Kraken realizes it, noting on his Twitter that they can get similar requests from the Canadian government, and other countries that want to use the pressure on crypto owners to meet their political goals. 

I guess soon other crypto exchanges will refuse to do it too. 

UPD from the editorial staff: Binance, Huobi and FTX have already said they will not freeze Russian accounts on their exchanges. 


As we have seen above, it is hardly possible to prevent the Russian government from circumventing sanctions by using cryptocurrencies. To do so, it is necessary to overcome a number of technological, economic, and political problems. Indeed, is it necessary to look for ways to solve these problems?  After all, the main idea of the whole crypto industry is to get rid of state regulation and ensure complete freedom of movement of capital despite borders, languages, and legal regimes. To ensure freedom also for those who do not want war, but want to leave the country, preserving their savings.     

Robert Silverman

Is there an error in the article?
To report