Two well-known cryptocurrency exchanges worldwide, Huobi and KuCoin, still provide services to users of sanctioned Russian banks, according to a report from February 24th. The report alleges that the exchanges failed to take steps to prevent blacklisted Russian banks, including Sberbank, from using their platforms.
Although the exchanges do not accept funds from these banks, they still allow traders to transact with each other accounts with sanctioned institutions, representing a “direct violation of U.S. and European sanctions with a little bit of a loophole,” according to Inca CEO Adam Zarazinski.
Crypto Markets Vulnerable To Russian Sanctions Evasion
Despite crackdowns on Russian exchanges and mixing services by the U.S. Treasury, the report shows that there are still vulnerabilities in the system. While Treasury officials say they have seen little evidence that digital assets can be used to dodge sanctions at scale, policymakers like Sen.
Elizabeth Warren has warned that crypto markets represent a significant vulnerability in the U.S. sanctions on Russia. Inca’s report highlights how certain exchanges still allow Russians to move their holdings in and out of the country using peer-to-peer platforms despite escalating sanctions.
The report also identifies potential vulnerabilities on two other major exchanges, most notably Binance, the world’s largest crypto trading platform. According to the report, Binance offers multiple methods for Russians to convert local currencies into crypto through exchange and a peer-to-peer market.
Although the platform does not allow users to use Russian credit cards, debit cards, or accounts from sanctioned banks on its exchange, those deposits are accessible through its peer-to-peer market.
Binance firmly denied the report’s claims, stating that the exchange actively filters all user communications to prevent any potential links with Russian entities.
Meanwhile, the report suggests that ByBit enables the conversion of Russian rubles into crypto via its P2P market and fiat deposit. Additionally, it allows Russian citizens to use the exchange’s deposit, trading, and withdrawal limits despite officially curtailing operations in Russia due to sanctions.
Despite sanctions, Russian banks are still able to use these exchanges, exposing the limitations of U.S. efforts to isolate Russian institutions and oligarchs from the global financial system.
This comes one year after Russia’s full-scale invasion of Ukraine. To prevent illicit finance, policymakers are pushing for stricter regulation of cryptocurrency businesses, particularly to deter Russians seeking to evade sanctions.
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