Binance CEO Speaks up on Blocking Russian Customers, Calls it ‘Unethical’

Updated by Ryan James
In Brief
  • Binance CEO says that imposing sanctions on all Russian citizens is unfair, since many don't support the war against Ukraine.
  • Kraken and Coinbase have refused to impose bans on unsanctioned users.
  • Cryptocurrency suffers from liquidity problems that make it unlikely to be an easy replacement for a fiat currency.
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Changpeng ‘CZ’ Zhao said on Wednesday that it is “unethical” for Binance to sanction all Russian citizens.

Binance CEO says that avoiding sanctions is not a “crypto-specific issue,” dismissing pressure to prevent  Russian clients from using the Binance platform. Changpeng ‘CZ’ Zhao said in a recent interview with Bloomberg that the company has obeyed international governments’ mandates to impose limits on sanctioned clients. CZ said that expanding sanctions to all Russian citizens is “unethical.” The crypto firms follow the same regulations as banks.

CZ emphasized that Binance follows sanctions requirements very stringently. “Whoever is on the sanctions list, they won’t be able to use our platform; for whoever is not, they can,” Zhao said on Wed., March 2, 2022. “It’s not our decision to make to freeze user accounts. Facebook hasn’t banned Russian users. Google hasn’t banned Russian users. Google has not blocked off Russia. The U.S. hasn’t done that.”

All sanctioned Russians are restricted

President Joe Biden was reportedly discussing sanctions with crypto exchanges recently, with their role as a means of Russians avoiding sanctions a topic of recent headlines.

In response to calls from the Ukraine Vice Prime Minister on Sunday to block the crypto exchange accounts of Russians, Kraken CEO Jesse Powell said that while he respects Ukrainian citizens, it is not fair to ban all Russians from using the platform without a legal basis. A Binance spokesperson also noted that taking such action would “fly in the face” of everything crypto stands for, the most important of which is censorship resistance. Coinbase has also declined to block Russians who are not the target of sanctions. CZ echoed similar ethical concerns, “Also, on an ethical point of view, many Russians don’t support the war, so we should separate the politicians from the normal people.” In contrast, one Ukrainian NFT exchange said they had cut all ties with Russia and its neighbor, Belarus.

While the crypto markets are not regulated, regulators in the U.S. and European Union are looking to fortify safeguards in light of Russia’s recent invasion of Ukraine. Zhao said that Binance employs comprehensive user verification checks, ensuring that sanctioned addresses cannot transact on its platform. All crypto exchanges are subject to the same anti-money laundering regulations as banks, adding an additional safety net. It should also be remembered that all transactions are only pseudonymous. Wallet addresses can be linked to individuals via forensic methods.

Crypto has liquidity issues

The narrative that Russia could use crypto to evade sanctions has some flaws, the biggest being the liquidity problem. It is not easy to find a cryptocurrency exchange to buy large amounts of cryptocurrency. The ruble-to-bitcoin trading pair has a maximum liquidity of $200K at any given time on the world’s largest exchanges. This is a far cry from the $50B that passes through Russia on a daily basis, so moving large amounts of crypto to replace that is not trivial and highly unlikely.

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