Category: Russia

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Crypto Exchange Crypto Wallets Regulation Russia

Several Crypto Exchanges Close Russian Accounts Following EU Sanctions

cryptocurrency on a russian flag

A number of cryptocurrency exchanges, including Bitcoin.com, LocalBitcoins and Crypto.com, have reportedly opted to stop serving Russia-based customers following a raft of new sanctions enacted by the European Union against Russia on October 6th.

This news follows an earlier move by the blockchain-focussed developer Dapper Labs’ to ban Russian citizens from accessing its services. With numerous major exchanges set to follow suit, Russian residents’ access to crypto markets seems severely restricted.

New Sanctions Further Restrict Russian Access to Crypto

Previous sanctions had limited the value of crypto transfers between EU nations and Russia to €10,000, or approximately US$9,700. These new sanctions go much further, essentially banning the provision of crypto-asset wallet services to any person residing in Russia:

“Decision (CFSP) 2022/1909 removes the threshold for the existing prohibition on the provision of crypto-asset wallet, account or custody services to Russian persons and residents, thereby banning the provision of such services regardless of the total value of such crypto-assets…It shall be prohibited to provide crypto-asset wallet, account or custody services to Russian nationals or natural persons residing in Russia, or legal persons, entities or bodies established in Russia.” 

Offical Journal of the European Union, Volume 65

It’s unclear if this ban includes non-custodial wallets, such as those offered by Bitcoin.com and Crypto.com, or if it’s limited to custodial wallets held on exchanges and used by customers for trading.

Exchanges Set to Block Russian Customers Starting This Month

According to reports in the Russian media, Bitcoin.com gave Russia-based customers until October 27th to remove their assets from the exchange. After the deadline, Bitcoin.com will block customers from accessing their accounts.

Peer-to-peer crypto exchange, LocalBitcoins, blocked access to its services by Russian residents on October 7th, the day after the new sanctions were announced.

Many other exchanges will follow, with most major exchanges, including Binance and Coinbase, reportedly working towards complying with the new sanctions as quickly as possible. Having said that, it’s not currently known exactly when Russian access to most exchanges will end, as it could take some time to safely and effectively implement the restrictions.

Could Any Exchanges Defy The Sanctions?

It’s unclear whether any crypto exchanges intend to defy the new restrictions and continue offering services to Russian residents. 

Bitfinex has previously expressed opposition to EU sanctions against Russians. In March of this year, Bitfinex CTO Paulo Ardoino, expressed concern about cutting services to Russia, saying Bitfinex was prepared to safeguard customers’ access to their accounts unless ordered to do otherwise by regulatory agencies.

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Crypto Exchange Crypto News Hydra Markets Russia

World’s Largest Darknet Market Gets Taken Down

A German/US joint operation has seen Hydra Market – the world’s largest darknet marketplace – shut down. At the same time, the US Treasury’s Office of Foreign Assets Control (OFAC) has sanctioned wallets and a Russian cryptocurrency exchange known for money laundering.

The marketplace offered a variety of services, from allegedly arranging drug transactions to money laundering. OFAC sanctioned more than 100 cryptocurrency addresses related to Hydra, adding them to its Specially Designated Nationals and Blocked Persons (SDN) list.

Darknet market share of total market. Source: Chainalysis

The Russian-based Hydra Market has been the largest darknet market for the past few years, even though it only served Russian-speaking countries. In 2021, Hydra received more than US$1.7 billion worth of cryptocurrency, which accounts for over 75 percent of all darknet market revenue globally.

Money Laundering Staunched by Hydra’s Closure

In fact, since 2020, Hydra received US$645 million worth of cryptocurrency from illicit sources, including other darknet markets, wallets holding stolen funds, ransomware operators, and scammers. Chainalysis believes much of this was due to its widely used money-laundering services.

A vendor listing for a money-laundering service on Hydra.

Russian Crypto Exchange Goes Down With Hydra

Garantex is a sizeable crypto exchange based in Russia and, according to the Chainalysis 2022 Crime Report, is also the largest platform for money laundering in Moscow, having received more than US$10 million from known ransomware strains including NetWalker, Phoenix Cryptolocker, and Conti.

Following the closure of Hydra, OFAC has also sanctioned Garantex, which has been previously investigated for its money-laundering indiscretions.

Illicit Activity a Fraction of Total Transaction Volume

As it stands, illicit activity represents only a small portion of total transaction volume as adoption in the crypto space has soared. The level of criminality on the blockchain has lessened considerably, with illicit transactions accounting for a much smaller segment of the total.

Across all cryptocurrencies tracked by Chainalysis, total transaction volume grew to US$15.8 trillion in 2021, up 567 per cent on 2020’s totals. Given the massive increase in adoption, it’s no surprise that more cybercriminals are using cryptocurrency. But the fact that the increase in illicit transaction volume was nearly an order of magnitude lower than overall adoption shows that illicit activity may be in decline.

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Bitcoin Crypto News Russia

Sanctions-Hit Russia Considers Accepting Bitcoin for Oil

According to Russia’s chairman of the Congressional Energy Committee, Pavel Zavalny, the federation is open to accepting bitcoin for its natural resources exports.

Russia Pressured to Find Alternative Solutions

Amid global economic sanctions and a rapidly depreciating national currency, Russia has found itself under significant economic pressure, requiring it to consider creative solutions to keep its economy afloat.

Since Russia exports around 10 percent of the world’s oil and about 40 percent of Europe’s natural gas, the sanctions imposed have dealt a blow to both the federation and global citizens alike. As Russia’s critical revenue source has all but dried up, everyday people are feeling the pain as global energy prices have skyrocketed. In response, Russia has resorted to accepting different currencies for its natural resources.

Russia Retaliates

According to a press conference translation, Zavalny suggested that Russia was open to accepting different currencies for its exports, though the method would depend largely on the preference of the buyer and the importing country’s relationship with Russia:

When it comes to our ‘friendly’ countries, like China or Turkey, which don’t pressure us, then we have been offering them for a while to switch payments to national currencies, like rubles and yuan. With Turkey, it can be lira and rubles. So there can be a variety of currencies, and that’s a standard practice. If they want bitcoin, we will trade in bitcoin.

Pavel Zavalny, chairman, Russian Congressional Energy Committee

The news comes after President Vladimir Putin announced earlier this week that so-called “unfriendly” countries would need to pay for Russian gas in rubles.

Harsh Measures Call For Hard Money

In his press conference, Zavalny echoed these sentiments in relation to “unfriendly countries”, saying: “When we exchange with Western countries … they should pay in hard money. And hard money is gold, or they must pay in currencies which are convenient for us, and that is the national currency – rubles.”

It’s been argued that when the G7 nations confiscated Russia’s US$700 billion in reserves, it marked the beginning of a “new monetary world order“. Whether you agree with that assessment or not, geopolitics quite clearly has had an impact. We may conceivably be witnessing the demise of the petrodollar in real-time and simultaneous emergence of a world where commodities are priced in hard assets.

While it may have been viewed as somewhat fanciful in years gone by, it is not entirely improbable that bitcoin will emerge in the coming decade as a pristine global reserve asset. At least, that’s what Bitcoiners such as Greg Foss think:

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Crypto News Institutions Russia Ukraine

Report Shows Institutions Are Selling Crypto Amid Ongoing Geopolitical Uncertainty

Crypto-related investment products have suffered outflows of over 100 million in the past seven weeks amid ongoing geopolitical uncertainty, as stated in a recent report from digital asset manager CoinShares.

Institutions Sell Crypto Amid Regulatory Uncertainty

It was only little more than a month ago that Crypto News Australia reported how institutional adoption had accelerated following BlackRock’s decision to offer crypto trading services to its clients, but now it seems it has taken a 180-degree turn amid investors’ fear regarding the current geopolitical scene in Europe and regulatory uncertainty.

Given there has been little price response and that outflows of US$30 million were also seen in Europe, it highlights [that] the reasons are unclear. Regulatory concerns and geopolitics remain at the forefront of investors’ concerns for digital assets.

CoinShares report

Bitcoin and Ethereum Among the Most Affected Assets

At least 80 percent of the outflows come from North America-based companies, with Grayscale, Purpose, and ProShares leading the board. The exact reasons remain unclear, but CoinShares said it’s likely a response to US President Joe Biden’s latest executive order, which calls on the government to examine the benefits and risks of cryptocurrencies.

Flows by asset. Source: CoinShares

Bitcoin (BTC) and Ether (ETH) were the most affected cryptocurrencies, with outflows of US$70 and US$51 million, respectively. The altcoin market also had its share of inflows – mainly Solana (SOL), Ripple (XRP), and Polkadot (DOT).

Solana, Ripple and Polkadot saw minor outflows totalling US$0.3 million, US$0.7m and US$0.9m respectively, while Cardano and Litecoin saw minor inflows of US$0.2 million.

CoinShares report

Blockchain equity and multi-asset investment products have also taken a hit. As per the report, inflows amounted to US$12 million and US$4.1 million respectively.

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Bitcoin Crypto News Economics Russia

Global Bank ‘Credit Suisse’ Says We’re Witnessing ‘A New Monetary World Order’

Zurich-based financial services giant Credit Suisse has released a report entitled “Bretton Woods III” in which its strategist argues that we are witnessing the birth of a new monetary world order.

New Monetary World Order – Bretton Woods III

The report starts by saying:

We are witnessing the birth of Bretton Woods III – a new world (monetary) order centered around commodity-based currencies in the East that will likely weaken the Eurodollar system and also contribute to inflationary forces in the West.

Zoltan Pozsar, Credit Suisse strategist

“Bretton Woods” refers to the 1944 World War II agreement in which 44 countries consented to a new monetary system in which the US dollar was pegged to gold, and other currencies were pegged to the greenback.

The arrangement completely disintegrated in 1971 when president Richard Nixon took the US off the gold standard. This marked the beginning of the current fiat currency system, what the author terms “Bretton Woods II”, a regime in which the US dollar’s value was largely backed by “inside money” (mostly US treasury bonds).

As G7 nations seized Russia’s foreign exchange reserves following its invasion of Ukraine, Pozsar argues that this marked the beginning of “Bretton Woods III”.

From the Bretton Woods era backed by gold bullion, to Bretton Woods II backed by inside money (Treasuries with un-hedgeable confiscation risks), to Bretton Woods III backed by outside money (gold bullion and other commodities).

Zoltan Pozsar, Credit Suisse strategist

The author notes that the West’s sanctions will result in self-inflicted financial instability, even if it causes pain for Russia. To believe that sanctions won’t lead to price stability risks is to “also believe in unicorns”.

He adds that “this crisis is not like anything we have seen since [Richard] Nixon took the US dollar off gold in 1971”. Pozsar then concludes that the West will therefore necessarily experience continued and increased levels of inflation.

‘Money Will Never Be the Same Again’

Pozsar outlines some possibilities as to what the future may look like and how the Chinese Communist Party may play a role (hint – a big one). He concludes his analysis with an ominous warning, saying:

“After this war is over, ‘money’ will never be the same again … and Bitcoin (if it still exists then) will probably benefit from all this.”

Over extended periods of time, Bitcoin has tended to act as a good hedge against inflation despite being correlated with equities. However, recently it surprised commentators by breaking this correlation and soaring 15 percent overnight in response to the Russian/Ukrainian conflict.

We’re living through an extraordinarily volatile and uncertain period of history, and no doubt the monetary system will look very different in the years to come. Is Bitcoin going to play a role? Quite possibly.

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Crypto Exchange Crypto News Institutions Russia

Coinbase Blocks 25,000 Russian Addresses Linked to ‘Illicit Activity’

Coinbase has blocked 25,000 addresses from Russian customers supposedly linked to “illicit activity”.

Not Your Keys, Not Your Coins

As per a March 6 blog post, Coinbase said it conducted its own investigations to identify and block 25,000 addresses believed to be linked to sanctioned actors and individuals that demonstrated “high-risk” behaviour.

Later, the exchange shared the addresses with the US government to “further support sanctions enforcement”.

Today, Coinbase blocks over 25,000 addresses related to Russian individuals or entities we believe to be engaging in illicit activity, many of which we have identified through our own proactive investigations.

Coinbase blog post

What turned up the heat for the crypto community is that five days ago, Coinbase claimed it would not sabotage Russian customers by freezing their accounts at the request of Ukraine’s vice prime minister as this would “harm economic freedom”.

Most people in crypto Twitter assumed that Coinbase had received pressure from the US Securities and Exchange Commission and the Biden administration to somehow take part in economic sanctions imposed on Russia.

The exchange, however, didn’t elaborate on what it meant by illicit activities:

It’s no surprise the announcement caused a lot of controversy, bringing back the old crypto saying – not your keys, not your coins:

The general reaction of politicians and most Western governments to the Russian invasion was to condemn it and impose severe economic sanctions on the federation’s economy.

A handful of online businesses suspended their services in Russia a few days after the invasion. These included some traditional finance companies, as well as some crypto platforms and products.

Categories
Bitcoin Economics Russia

Can Bitcoin Protect You Against Rising Inflation?

Market volatility and geopolitical tensions remain high amid an ongoing Russian currency crisis, and the United States’ highest CPI print in 40 years. Where does Bitcoin fit into this inflationary environment?

As the “digital gold” narrative gained institutional traction in 2021, much of that argument rested on the belief that Bitcoin provided a hedge against inflation.

However, Bitcoin hasn’t performed as expected, nor has it been predictable. Most of the time it’s acted as a high-risk technology stock, experiencing sharp drawdowns whenever the market shifts risk-off. This broad correlation with equities was, however, recently reversed amid a widespread market sell-off following Russia’s invasion of Ukraine.

Notably, one of the main features of the “digital gold” narrative is that Bitcoin trades (or is otherwise supposed to trade) the same way as gold during these inflationary bouts. A failure to provide short-term protection against inflation is therefore viewed by some as a fatal flaw. This reasoning is however misguided.

Bitcoin as an Inflation Hedge

When considering whether an asset like Bitcoin is an inflation hedge, one shouldn’t be looking at how it reacts to the news cycle. Instead, we should zoom out and evaluate its performance over long periods of time.

Looking at gold, it tends to be the type of asset that underperforms for much of the time but dramatically outperforms in specific periods. This is reflected in the illustration below:

Gold’s performance against inflation. Source: Ecoinometrics

By contrast, Bitcoin has tended to outperform inflation over relatively short and long periods:

Bitcoin’s performance against inflation. Source: Ecoinometrics

Despite being down more than 40 percent from its all-time high, even at the current price of US$38,775, Bitcoin has dramatically outperformed both gold and the broader US stock market over periods exceeding one year.

BTC, gold, S&P 500 performance compared. Source: Casebitcoin.com

Key Takeaway

When it comes to evaluating whether an asset acts as an inflation hedge, it is critical to consider its performance over longer periods. How a particular asset fluctuates in response to news, while interesting, tells us nothing about its capacity to protect purchasing power over extended periods of time.

If you were one of the 1.1 billion people living with double-digit inflation, which asset would you be turning to? Available data tends to suggest that Bitcoin is a good bet.

Categories
Crypto News MetaMask NFTs OpenSea Russia

OpenSea Updates Banned Countries List, Sparking Decentralisation Debate

OpenSea, the world’s largest NFT marketplace, has updated its list of banned countries according to the US sanctions list and has many bringing up the issue of decentralisation.

US-based OpenSea has reportedly begun barring Iranian users from its platform, which has led to outrage from NFT collectors and sparked a fresh debate regarding decentralisation in the crypto space. The list has expanded since last week, adding Iran to the list after only users in separatist areas of Ukraine were banned, along with users from Venezuela who were added to the list in error.

The Office of Foreign Assets Control (OFAC) of the US Department of the Treasury administers and enforces economic and trade sanctions based on US foreign policy and national security goals against targeted foreign countries and regimes, terrorists, international narcotics traffickers, those engaged in activities related to the proliferation of weapons of mass destruction, and other threats to the national security, foreign policy or economy of the US.

US Office of Foreign Assets Control

Iranian Artist Vents to 4,700 Followers

Last week, Iranian users of OpenSea woke up and started posting on Twitter that their accounts had been deactivated or deleted without prior warning from the platform. “Bornosor”, an NFT artist from Iran, vented his frustrations to 4,700 followers in a tweet that gained traction very swiftly, garnering 342 retweets and 1,000+ likes within just a few hours:

According to an OpenSea spokesperson, OpenSea reserves the right to block users based on sanctions:

“Our terms of service explicitly prohibit sanctioned users or users in sanctioned territories from using our services. We have a zero-tolerance policy for the use of our services by sanctioned individuals or entities and people located in sanctioned countries. If we find individuals to be in violation of our sanctions policy, we take swift action to ban the associated accounts.”

As it stands, current US sanctions outline that American companies are not allowed to provide goods or services to any users based in countries on the sanctions list, including Iran, North Korea, Syria, and now also Russia:

Actions from OpenSea Provoke Decentralisation Debate

The actions taken by OpenSea have fostered new debates about whether large blockchain-based firms and services are adequately decentralised, with the MetaMask wallet joining in on enforcing sanctions:

According to MetaMask’s Twitter account, Venezuelan users were accidentally banned from accessing their wallets after blockchain development company Infura inadvertently broadened the scope of its sanctions to the South American country.

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Crypto Exchange Payments Russia

Crypto Exchanges Resist as Visa, Mastercard and Paypal Suspend Russian Services

Major crypto exchanges, including Coinbase and Binance, have continued to resist calls to suspend their services in Russia despite a wave of withdrawals of major payment providers from the Russian market.

Following on from PayPal’s withdrawal last week, Visa and Mastercard have now moved to suspend their services inside Russia:

In a statement released on March 5, Visa announced its restrictions would come into effect in coming days and would mean Visa cards “issued in Russia will no longer work outside the country and any Visa cards issued by financial institutions outside of Russia will no longer work within the Russian Federation”.

In a similar move, Mastercard will be suspending all cards issued by Russian banks, and any cards issued outside Russia will not work at Russian merchants or ATMs.

Russia Partners With Chinese UnionPay to Fill Void

In response to the announcements by Mastercard and Visa, several Russian banks – including the federation’s largest lender, state-owned Sberbank – have said they will begin issuing cards from the Chinese operator UnionPay in partnership with the Russia-based payments network MIR.

Crypto Unlikely to Help in Avoiding Sanctions

Although at first glance it seems reckless for crypto exchanges to continue operating in Russia,  given the risk of circumventing sanctions, the relatively small scale of crypto markets, the lack of Ruble pairs, and blockchains’ highly traceable and immutable nature may actually make the risk relatively small.

According to Carole House, the US National Security Council’s director of cybersecurity, the sheer volume of currency Russia would need to circumvent the West’s economic sanctions “would almost certainly render cryptocurrency as an ineffective primary tool for the state”.

Jake Chervinsky, the Blockchain Association’s head of policy, created a Twitter thread to explain why Russia can’t use crypto to evade sanctions:

Perhaps more importantly, there exists a much more established alternative for the Russian government – the Chinese CIPS network (which is essentially the Chinese SWIFT).

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Airdrop Crypto News Russia Scams

Ukraine Update: Over $56 Million in Donations, Airdrop Cancelled and Scams Aplenty

Over US$56 million in crypto donations have now been sent to support Ukraine in its ongoing conflict with Russia. This milestone comes amid the cancellation of a planned airdrop from the Ukrainian government and a spate of scams looking to capitalise on the crypto community’s generosity.

Crypto Generosity Providing Crucial Aid

According to the blockchain analytics platform Elliptic, over 100,000 separate donations have been made to the Ukraine government and supporting NGOs since the start of the conflict, totalling just over US$56 million. This is over 50 percent up from the US$37 million figure reported by Crypto News Australia reported just a few days ago.

The donations are made up of a variety of cryptocurrencies. Elliptic lists the approximate breakdown as:

  • 31.2 percent Bitcoin;
  • 33.7 percent Ethereum;
  • 17 percent stablecoins;
  • 14.5 percent Polkadot; and
  • 3.6 percent other crypto.

In addition to crypto donations from individual users, UkraineDAO auctioned off a Ukrainian flag NFT for US$6.5 million worth of Ethereum, proceeds of which will go to the NGO Come Back Alive.

Government Airdrop Cancelled Amid Spoof

A planned Ukrainian government airdrop – designed to reward users who had donated to the Ukrainian cause – was cancelled after the Peaceful World token (WORLD) was identified as a spoof of the official Ukrainian government airdrop:

The Ukrainian government decided to abandon its airdrop to avoid exposing users to potential phishing scams and spam attacks:

Scammers Seek to Take Advantage

Amid the wave of generosity, scammers have sought to take advantage by duping well-intentioned users into donating crypto to addresses not associated with the Ukrainian government or any registered NGOs.

A range of Ukrainian crypto scams have been reported, including phishing emails purporting to be from the UN Office for the Coordination of Humanitarian Affairs, fake websites, and dodgy forum posts. 

Malware Hunter Team has reported a rapid increase in phishing websites with domains such as “Ukraine-donate” and “Ukraineglobalaid” since the start of the conflict.

To avoid falling victim to a donation scam and to ensure your funds go where you intend, it is recommended you only donate to wallet addresses released by officials from the Ukrainian government or supporting NGOs.