Crypto intelligence firm Inca Digital published a report alleging cryptocurrency, particularly the Tether stablecoin, has been used for Russian sanction busting via cryptocurrency exchanges. It states that Huobi and KuCoin allow transactions for their P2P platforms that use sanctioned Russian banks for deposits. It makes a similar allegation about Binance but sourced the data from ‘Digital intelligence assets inside Russia’ rather than directly.
Inca’s clients include the Department of Defense, the CFTC and Fidelity.
The main allegations relate to peer-to-peer (P2P) markets where the exchanges provide the platform rather than the core cryptocurrency exchanges.
According to Inca, Binance “offers multiple methods for Russians to convert local currency into crypto, namely their exchange, OTC desk, and a Peer to Peer (P2P) market. Each of these options is completely open to Russians without KYC (know your customer) for up to a $10,000 equivalent deposit amount, but is easily circumvented after that amount.” It alleges that transactions can be disguised by displaying payments to non-Russian utility companies.
It confirms that Binance does not support Russian cards or sanctioned bank accounts for the primary crypto exchange. In a statement, Binance refuted the allegations saying it is a full-KYC platform.
Inca analyzed mentions of crypto exchanges in Russian social media. Shortly after the outbreak of the Ukraine war, the top mentions were Binance, KuCoin and Bybit, in that order. Binance’s proportion increased to around a third by May 2022. From August to October, KuCoin led in social media mentions before another Binance surged during November 2022.
Sanctions were initially imposed on larger crypto transactions following the outbreak of the Russia-Ukraine war – for wallets that held more than €10,000. In October 2022, Europe broadened the sanctions to all crypto wallets, accounts and custody services, no matter the amount, to prevent local businesses from skirting sanctions.
There has been much talk by the Russian government and even Putin about a desire to use crypto to evade sanctions, but the Bank of Russia is not supportive. Instead, there is talk of using Russian digital financial assets – tokenized real world assets – and the possibility of a cross border CBDC. Reports indicate work is starting on the sovereign digital currency for international payments in the current quarter.
