Amid the West’s intensifying efforts to punish Russia’s authorities for their invasion of Ukraine, crypto exchanges are facing long-term damage to their industry if they decide to remain active in the Russian market, according to David Schwimmer, CEO of the London Stock Exchange Group.
So far, most crypto exchanges have avoided dropping all of their Russian customers despite concerns expressed by the US and European decision-makers that Vladimir Putin’s regime could use crypto as a vehicle to dodge some of the sanctions.
However, this short-term strategy could become increasingly difficult to maintain, as crypto exchanges are heading towards a “fork in the road” which is likely to force them to either follow in the footsteps of major global financial players, or fully embrace independence from these players, Schwimmer said at a conference organized by the Futures Industry Association in Boca Raton, Florida.
“If that industry is seen as a bad actor … on the implementation of, or the avoidance of, sanctions in terms with what’s going on with Russia, I think that would have a long-term impact in terms of how that industry is perceived,” he said, as quoted by Reuters, calling it a “watershed moment.”
Some senior industry representatives, such as crypto exchange Coinbase CEO Brian Armstrong, have expressed doubts that there was “a high risk” of Russian oligarchs using cryptoassets to avoid the imposed sanctions. “Because it is an open ledger, trying to sneak lots of money through crypto would be more traceable than using United States dollars cash, art, gold, or other assets,” he said.
At the same time, most exchanges admit they do not plan to ban Russian users unless being explicitly told to do so by regulators.
A spokesperson for Gate.io told Cryptonews.com that it “remains compliant with local and international regulations and as such [has] no immediate plans to ban any users from a specific country or geography unless being legally required to by regulators or specifically outlined in sanctions being issued.”
Additionally, a spokesperson for OKX said the exchange was reviewing customer accounts and activity to identify any exposure to sanctioned parties, but that at “this stage, we do not have plans to block a particular region.”
The Kraken CEO Jesse Powell previously stated that his platform also has no intention to start blocking users based on their geographical location – unless required to do so. However, he was careful to point out that such a legal requirement could well be forthcoming – and that Russian users should take note.