In response to Russia’s military invasion of Ukraine, one of the first sanctions was imposed on Russia. It was intended to isolate the country from the international financial systems. Russian banks were denied access to SWIFT and international payments networks, while private payment companies such as Visa and PayPal followed closely. These highly regulated, publicly monitored organizations were quick to respond to the crisis. However, there was growing concern that the Russian state and companies and oligarchs associated to it could use digital currency exchanges to bypass sanctions.
The Bank of England and Financial Conduct Authority in the United Kingdom asked crypto companies to implement sanctions across their platforms. Since then, regulators and central banks around the globe have joined the chorus of concern. Japan recently announced that it would be updating its Foreign Exchange and Foreign Trade Act. This will allow it to be applied to crypto assets. Exchanges will need to determine if their clients are Russian sanction targets.
Yet, some of the world’s most prominent crypto exchanges continue to lag behind and are hesitant to follow the guidelines set by regulators and policymakers around the globe. Binance, Coinbase, Kraken and Coinbase are all showing empathy for the suffering of Ukrainians. Some have even frozen accounts that were linked to sanctioned persons, but none of them have taken any action to re-engage with Russia or block all money flowing into and out of Ukraine.
Related: Every Bitcoin helps: A crypto-fueled aid program for Ukraine
As the CEO of the largest cryptocurrency exchange in Poland, I am well aware of the dilemma that they are facing. They must choose between free-market ideals or a sense of moral obligation. However, as the horrific human tragedy unfolds in Eastern Europe we, as an industry, need to do more to condemn it through our platforms. We at Zonda didn’t take the decision to pull out of Russia lightly. However, we made it quickly and voted in favor of peace, transparency, and respect for global regulation. Many around the globe will view indifference or active support as a sign of weakness if they fail to do so.
The moral crossroads of cryptocurrency exchanges
The tension that lies at the heart of cryptocurrency’s ideology has been exposed by the Ukraine conflict. The original vision for digital currencies was to create a global decentralized financial system free from central banks, governments and large financial service firms. Yes, decentralization is something that we should explore, not just for the sake of greater transparency, accountability, and security. We cannot allow our quest for financial independence to lead us down a dark road, where we believe that the laws of the country — moral and otherwise — don’t apply to us. The conscious facilitation or support of criminal activity cannot be justified by ideological support for decentralization.
As an industry, we should consider what kind of world do we want and allow our morals to guide our actions. Russia’s invasion in Ukraine is an undisputed violation of international law. The indiscriminate targeting and killing of civilians in places like Mariupol is also not ethical.
Related: “I’ve never before paid with crypto”: How digital assets can make a difference in a war
Greater marginalization is possible
The current crisis requires a coordinated response from all industries. It provides an opportunity for the global crypto industry to come together and take collective action. Crypto asset industry must do more to show that it is serious about the activities taking place beneath its roof. This could mean that Russian and Belarusian accounts are frozen and requests for new accounts from those living in these countries rejected. This is, in my opinion, the best way to shake off the criminal connotations that continue plague our industry.
Bitcoin’s (BTC), price has risen dramatically over the last few years. A large factor in this is greater integration with the wider financial service industry. Failure to understand the crisis could jeopardize the trust that the crypto industry has earned over the years with regulators and policymakers as well as consumers. This would indicate to the stakeholders that it is completely disconnected from their missions and from the real world.
Of course, there are also commercial considerations. Companies that show their customers a shared sense and moral value have 14.1% higher revenue growth and 34.7% higher annualized total shareholder returns. This is not unusual in the crypto sector. As the war in Ukraine rages, those who fail to quickly support the victims of the conflict will be remembered.
Related: Crypto gives Russia no way to escape Western sanctions
Is regulation the solution?
In February, the Financial Stability Board declared that it would develop a global regulatory framework to regulate crypto assets. This is the first step towards international homogenous guidelines. The United States Securities and Exchange Committee also launched a plan for regulation of alternative trading systems. This would allow regulators to probe crypto platforms and decentralized finance protocols.
It is not clear that the regulations will require economic sanctions to be implemented. However, they will establish additional checks and balances that will increase transparency and dissuade illegal activity. It’s not secret that regulators are struggling to keep up with the speed of innovation in cryptospace. We should not wait to see if they catch up and do the right thing. We have to continue to uphold the industry’s reputation that we love.
This article is not intended to provide investment advice. Every trade and investment involves risk. Readers should do their research before making any decision.
These views, thoughts, and opinions are solely the author’s and do not necessarily reflect the views or opinions of Cointelegraph.
Przemyslaw Kral, the CEO of Zonda (previously BitBay), serves as its chairman. Przemyslaw Kral was previously BitBay’s chief legal officer. Przemyslaw played an important role in Zonda’s strategic business development and its regulatory approval in Canada, Estonia, and other countries. Przemyslaw is an attorney with over 20 years experience and is a member the Foreign Lawyers Association of the British Bar Council.
Eileen Wilson –Technology and Energy
My Name is Eileen Wilson with more than 5 years of experience in the Stock market industry, I am energetic about Technology news, started my career as an author then, later climbing my way up towards success into senior positions. I can consider myself as the backbone behind the success and growth of topmagazinewire.com with a dream to expand the reach out of the industry on a global scale. I am also a contributor and an editor of the Technology and Energy category. I experienced a critical analysis of companies and extracted the most noteworthy information for our vibrant investor network.