The US and European Union rely heavily on banks to flag and block transactions from sanctioned businesses or individuals. But digital currencies operate outside of the traditional financial system. Government officials are concerned that cryptocurrency exchanges are not complying with sanctions and that transactions on these digital exchanges are difficult to trace.
Coinbase Global and Binance, two of the world's largest exchanges, have said they are complying with all government sanctions, but reject any further calls to ban Russian users entirely unless imposed by governments.
CNN's Richard Quest spoke with Binance founder and CEO Changpeng Zhao this week about sanctioning rules, cryptocurrencies, and why he thinks anonymity in the world of digital currencies is a myth.
Search: Tell me where does your platform stand in the attempts of those who may be sanctioned or others simply to evade sanctions by using cryptocurrencies. What is your position on this now?
Zhao: First of all, Binance follows all the sanction rules very strictly, so we will block anyone who is on the sanctions list or even anyone who is even remotely related to them... their wives, their lawyers... and their friends... We also see that we do not have the ability to freeze the assets of other normal Russian users because we see that that is illegal for us. It is not up to us to decide which assets we can and cannot freeze. That is for governments to decide.
As for the second point of using crypto to avoid penalties, I think that is a myth. If you look at the data, nobody smart does that. Crypto is too traceable. Governments around the world are getting better and better at tracking crypto transactions. So crypto is not good for that.
Search: To be clear, have you taken and will you now take a position on the war? Because many people feel that cryptocurrencies, the new distributed financing mechanisms ... many people seem unwilling to say 'right or wrong', 'yes or no', 'for or against'.
Zhao: Yes, we are totally against war. We are totally against politicians, dictators who start wars. So that part we are totally against. We are not against the people... There are many people on both sides of Ukraine and Russia who are suffering. And we want to help those people. In fact, I believe we are the first company to commit US$10 million to help refugees in Ukraine, and have already donated most of it through international UN refugee charities. So yes, we have a very strong position on that.
Search: Last question on this area, do you think a lot of people in the fintech industry (and I'm asking you this because you've taken a strong stand yourself) do you think a lot of people are going around saying, 'see no evil? , hear no evil'? It reminds me of the old shared platform arguments at the beginning about copyright issues: "We're just a shared platform." Do you think fintech does need ... as an industry, get out of the fence more often?
Search: Because cryptocurrencies originally made anonymity a great virtue, and you know our old friend Bitcoin came along and said, "You won't be able to trace, follow, or know who's behind the transaction." And that gave him [industry the] reputation...
Zhao: Yeah, that's a bit unfortunate because it's very tricky right now... Most transactions need to go through a centralized exchange, any large value transaction, because decentralized exchanges don't have enough liquidity yet.
