While much of the financial world is united in its efforts to distance itself from Russia as the country’s leader, Vladimir Putin, orders his forces continue their invasion of neighboring Ukraine, many of those in the cryptocurrency world are decidedly more ambivalent.
Is this a function of the underlying libertarian spirit that powers much of the enthusiasm for digital assets? Or is this just a reflection of a relatively young industry that is not yet ready to take on the responsibilities that its growing role in the financial world will eventually demand?
First, the ask. At the beginning of the week, Ukrainian Vice Prime Minister and Minister for Digital Transformation Mykhailo Fedorov took to social media to ask cryptocurrency exchanges to block transactions from Russia. Federov’s request was not just directed at the Russian government, or the country’s notorious oligarchs, but for everyday Russian users of cryptocurrencies, as well.
“It’s crucial to freeze not only the addresses linked to Russian and Belarusian politicians,” Federov wrote on Twitter, “but also to sabotage ordinary users.”
In the same way that some people have criticized the international sanctions regime against Russia for allowing a loophole when it comes to energy – specifically banning oil and gas exports from Russia – Federov and others have warned that not restricting, if not outright eliminating, Russian access to cryptocurrencies is a critical flaw in the effort to financially squeeze the Russian economy.
In response to this request, many nations have taken action. France’s Finance Minister, Bruno le Maire, said that the EU would include cryptocurrencies in its sanctions. The Financial Conduct Authority in the U.K. has reminded its U.K.-based and regulated cryptocurrency companies of their obligations to respect the sanctions policy against Russia. Even those cryptocurrency firms that are not regulated have been encouraged to support the sanctions regime. “We would urge unregulated member(s) to take action to ensure your platforms do not become a loophole for sanctioned Russians,” U.K. cryptocurrency organization Crypto UK said in a statement.
In the U.S., while some lawmakers have encouraged the government to help ensure that Russians are not using cryptocurrencies to skirt sanctions, the Biden Administration appears less concerned about that threat – at least on the large scale. Carol House, director of cybersecurity for the National Security Council said this week that “the scale that the Russian state would need to successfully circumvent all U.S. and partners’ financial sanctions would almost certainly render cryptocurrency as an ineffective primary tool for the state.” If anything, it seems that U.S. authorities are somewhat more concerned about potential theft and cybersecurity issues surrounding cryptocurrency companies than they are of Russians using these firms and exchanges for what would otherwise be legitimate purposes.
The response from cryptocurrency companies – including some of the largest firms like Binance and Kraken – have suggested that while they are comfortable blocking the accounts of sanctioned Russians, banning all Russians from their platforms is, for these companies, a bridge too far. At least for now.
“We are not political, we are against war, but we are here to help the people,” Binance founder and CEO Changpeng Zhao said, explaining his company’s position. “There are a few hundred individuals that are on the international sanctions list in Russia, mostly politicians, and we follow that very, very strictly.” But Zhao added that Binance draws a line “between the Russian politicians who start wars and the normal people, many normal Russians do not agree with war.”
Similarly, Kraken CEO Jesse Powell tweeted, “I understand the rationale for this request (to block Russians from Kraken’s platform) but, despite my deep respect for the Ukrainian people, Kraken cannot freeze the accounts of our Russian clients without a legal requirement to do so.”
That said, Powell noted, “Russians should be aware that such a requirement could be imminent.”
Additionally, it should be added many cryptocurrency companies are not agnostic to the conflict in the Ukraine and have lent their support to the Ukrainian cause. Federov expressed his, and his country’s, appreciation for the efforts of firms like Polkadot, which donated $5 million, as well as Solana and Everstake, which have created a joint effort called Aid for Ukraine in partnership with the country’s Ministry of Digital Transformation.
“This will certainly contribute to the Ukrainian victory as well as support civil people,” Federov said on Twitter earlier this week. “We will win – the best people (are) with us.”
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Here is our look at fintech innovation around the world.
Middle East and Northern Africa
- Qatar FinTech Hub announced that it was accepting applications for Qatari entrepreneurs and fintechs interested in participating in its fourth hackathon.
- Capital Bank of Jordan went live with the country’s first, digital-only neobank, Blink, this week.
- UAE-based spend management platform Alaan secured $2.5 million in seed funding.
Central and Southern Asia
- Pakistan-based agtech platform Jiye Technologies introduced a B2B buy now, pay later (BNPL) service for farmers and businesses.
- Indian financial data aggregator and analysis company Perfios secured $70 million in Series C funding.
- bSecure, a digital aggregation platform based in Pakistan, teamed up with payment service provider PayFast.
Latin America and the Caribbean
- Paysend partnered with mobile wallet service MOVii to expand its money transfer services to Colombia.
- Canadian payment card-linked solutions company Mobi 724 Global Solutions agreed to acquire Latin America-based B2B marketplace Avenida+.
- RapiCredit, a digital lender based in Colombia, announced plans to expand to the Dominican Republic and Brazil.
Asia-Pacific
- Digital-first Cambodia-based Oriental Bank teamed up with payment provider BPC.
- Singapore-based Zappi raised $4 million in seed funding for its e-commerce mobile app.
- Taiwan’s central bank moved closer to development of a central bank digital currency (CBDC).
Sub-Saharan Africa
- African fintech platform M-KOPA raised $75 million in growth funding to bring financing and digital financial services to the underbanked.
- Standard Chartered to bring its B2B marketplace, Solv, to Kenya.
- Ventures Africa looked at the challenge of building diversity in South Africa’s fintech industry.
Central and Eastern Europe
- Poland’s Igoria Trade teamed up with Banking Circle to expand its multicurrency card and account solutions.
- Visa and Mastercard blocked multiple Russian financial institutions from its payment network in response to the Russian invasion of Ukraine.
- Unified business payments platform Payhawk became Bulgaria’s first technology unicorn.
Photo by Artem Beliaikin from Pexels
