• March 08, 2022

The CEO of Kraken says, the crypto exchange would not shut down Russian accounts unless it is mandated by law.

  • Kraken is one of just a few cryptocurrency exchanges that has avoided an outright ban on Russian accounts.
  • Jesse Powell, Kraken's co-founder and CEO, says the exchange complies with legal restrictions, but blanket bans are unfair to ordinary Russians who may not support the country's invasion of Ukraine.
  • "It's a really drastic action," the CEO argues, "and it goes far beyond blocking someone's access to their music streaming service or photo sharing app." "We take the blocking of someone's bank access very seriously."

One of the world's major cryptocurrency exchanges would not remove Russian accounts unless the State Department instructs it to do so, according to its CEO.

Jesse Powell, Kraken's CEO and co-founder, said the San Francisco-based company is complying with legal restrictions and is working with law enforcement to ensure that banned accounts do not slip through the cracks. However, total prohibitions are unjust to ordinary Russians, who may not support the country's invasion of Ukraine, according to Powell.

In an interview, Kraken's CEO said, "It's a really harsh action, and it's way beyond turning off someone's access to their music streaming service, or their photo sharing app." "We take the blocking of someone's bank access very seriously."

The United States, the United Kingdom, and the European Union have launched a slew of sanctions against Russia in an attempt to persuade President Vladimir Putin to refrain from attacking Ukraine. This includes the country's exclusion from SWIFT, the extensively utilised worldwide payments communication system. Visa, Mastercard, major banks, and other multinational corporations such as Nike and Apple have all abandoned Russia.

Payment businesses are still technically able to operate there, despite the restrictions, as long as their accounts do not appear on a sanctions list. Powell predicted that if the US and NATO allies went much further with country-wide sanctions, such as those imposed on North Korea and Iran, the exchange would pivot and shut down.

"We will freeze the accounts if we are legally required to do so," he stated. "However, we haven't seen that work very effectively in terms of penalising individuals. if you freeze someone's financial account, they're no longer able to pay their rent, pay their debts, purchase food, or maintain their family."

Ukraine's government has urged the private sector to help. Vice Prime Minister Mykhailo Fedorov sent a tweet to all major crypto exchanges pleading with them to ban addresses, saying that it's "crucial to freeze not just the addresses associated to Russian and Belarusian authorities, but also to sabotage ordinary users."

Binance, Coinbase, and FTX, all Kraken competitors, are still active in Russia and, according to data provider Kakio, have experienced increased activity in Eastern Europe since the conflict began. According to Kaiko data, transactions in the Russian ruble and the Ukrainian hryvnia reached their highest levels in months, indicating increased demand amid the war.

Binance's representative stated that the exchange "would not indiscriminately freeze millions of innocent users' accounts," but that it will block the accounts of anyone on a sanctions list while "ensuring that all punishments are met in full."

Coinbase CEO Brian Armstrong made a similar statement on Thursday night, explaining that the exchange was not "preemptively" prohibiting all Russians from using the platform.

"We believe everyone deserves access to fundamental financial services unless the law says otherwise," Armstrong tweeted, adding that "we will of course follow those rules" if the US government chose to impose a ban.

Some members of Congress have raised the potential of Russia using cryptocurrencies to circumvent sanctions. In a letter to the Treasury Department, Elizabeth Warren and three other Senate Democrats asked for an explanation of how they're supervising the industry and how it would affect sanctions enforcement.

The industry has resisted this as well. According to Kraken's Jesse Powell, officials in Washington "don't grasp how bitcoin works" and "don't comprehend how regulated the space is already."

"They had this ten-year perspective," Powell explained, "when it was a very nascent technology." "It's a very tightly controlled and traceable sector." Politicians haven't caught up to where we are now, and their perspective on the matter is outmoded."