Crypto Firms Already Required to Enforce Sanctions
Over the past week, we have seen Ukrainian Deputy Prime Minister Mykhailo Fedorov call for a ban on cryptocurrency trading by all Russian wallet addresses. ECB President Christine Lagarde has called for a swift adoption of the EU's "Crypto Asset Market" regulatory proposal. And EU finance ministers have been discussing the risk of sanctions evasion through crypto assets. Is all the attention to crypto assets justified in the context of sanctions enforcement?
For starters, like any other legal entity, Crypto Asset Service Providers (or CASPs, in EU parlance) are required to apply sanctions. They have to freeze assets and prohibit transactions from sanctioned individuals and entities. In fact, several large crypto exchanges have indicated that they are doing so. National supervisors in, for example, the EU, the UK and the US are tasked with monitoring compliance, and you can read an example of that here.
Until now, financial sanctions have been the goal. While the the breadth and depth of the sanctions are far-reaching (in particular, the freezing of reserves of the Central Bank of Russia), no general ban on transactions with Russia has been issued. Cross-border payments, although severely restricted, are still allowed under Western sanctions. Not all Russian banks they are excluded from Swift, the global payment messaging service, at this stage. The sanctions certainly have serious repercussions that affect all Russians. However, the point here is: Western politicians have so far opted for sanctions not to be fully applied across the board. From this perspective, as much as we understand the Ukrainian government to have asked for it, denying all Russians access to crypto services does not seem to be in line with the sanctions approach chosen so far.
That said, the sanctions can change and some companies in other sectors have decided to (temporarily) stop doing business with Russia. In addition, the restrictions imposed by the Russian authorities to limit capital outflows are another major obstacle to cross-border transactions for both companies and individuals.
