Kraken blocks Bitcoin from accounts with ties to Russia
Kraken blocks Bitcoin from accounts with ties to Russia
Crypto

Kraken blocks Bitcoin from accounts with ties to Russia

By George Michael Belardinelli - 24 Oct 2022

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With yet another crackdown of sanctions on Russia, the European Union has effectively banned any cryptocurrency transactions (Bitcoin above all) to and from Putin’s country, and so Kraken, the US-based cryptocurrency exchange, has halted any related service.

Russia: Kraken forced to block Bitcoin from some addresses

The European Union continues with its “white-weapon” policy of restrictions and sanctions against Russia for its military actions against the free sovereign state of Ukraine.

The prolonged attempt is to weaken the neighboring transcontinental country to the point of producing effects that would limit military action and cause it to consider retreating or losing the conflict. 

The latest crackdown imposed a halt on any business to and from the Kremlin by Europeans for all cryptocurrency exchanges.

The warning was immediately adopted by Blockchain.com and Crypto.com, but only in the last few days has it been followed by a block from Kraken, the major US exchange for Bitcoin and other digital currencies.

Jesse Powell, co-founder of the famous mythological animal, had already spoken on the Russian affair, stating:

“Bitcoin is the embodiment of libertarian values, and as such, the firm will not curb Russian users without a legal requirement to do so.”

The latest round of sanctions, however, includes an outright ban on all cryptocurrency transactions between Russian wallet providers on the one hand and European wallet providers on the other.

Kraken and Bitcoin: the Iran case as a precedent to the Russia case

The long history of sanctions on so-called “hostile” countries or otherwise acting outside international regulations with actions that are dangerous militarily or strategically or concerning the sphere of human rights, has led Kraken to already have to deal with strong indecision with respect to whether or not to submit to certain diktats in a world of free markets.

On 26 July, the US Treasury Department placed the platform under investigation precisely for suspected circumvention of sanctions imposed on another country under international sanctions, Iran.

In that case, Kraken’s legal counsel Marco Santori had reassured that the exchange, although under scrutiny for a good two years by the US Treasury, is in full compliance and that Jesse Powell (the company’s co-founder) is calm about the investigation:

“Kraken has taken robust compliance measures and continues to grow its compliance team to accommodate business growth. Kraken closely monitors compliance with sanctions laws and, in general, also reports potential problems to regulatory authorities.”

At the time of the events, another major exchange had also come under scrutiny for determining misconduct with regard to the international restrictions imposed on Iran, namely Binance, which had declared itself similarly uninvolved and quiet about the allegations.

On the side of Ukraine 

Kraken, while complying a bit late compared to other platforms, in the past had distinguished itself by philanthropy and extending a hand to Zelenski’s country by donating as much as $10 million to help the cause against the oppressor.

At the time, through a tweet that raised an understandable fuss, the CEO of the US company had lashed out against freezing the operation of Russian accounts on his platform by hinting that it was not a viable solution, but that he preferred to donate $10 million for aid to the victim country:

“If we were to voluntarily freeze the financial accounts of residents of countries that attack unfairly and cause violence around the world, step 1 would be to freeze all US accounts. In practice, this is not really a viable commercial option for us.”

If shutting off relations with Russian money was considered such an unhealthy idea at the time, the choice to ban all crypto money flows between Russia and Europe must not have been an easy decision to undergo.

Conclusions

In a tranchy email, the company announced the closure of the accounts of all Russian customers dealing in Bitcoin through Kraken, however, they will only have access to the exchange for the purpose of withdrawing the sums in their possession without any possibility of making transactions.

The text concludes by stating:

“We will update our support center if there are any changes. We apologize for the inconvenience caused.”

The measure is aimed at not antagonizing a nation that could be a key player in a peaceful future and could bring significant liquidity to an internationally oriented and very commercially shrewd exchange as evidenced by Jesse Powell’s important statements in the recent past on the subject of international sanctions.

The news went around the world and allowed Kraken to move away from the magnifying glass of investigations into its account by untangling itself through responsible conduct and in line with the thinking of the international community by abandoning for the moment understandable misgivings about the blockade imposed by the European Union.

The US Treasury Department has not yet made its determinations on last July’s “Iran-Kraken” case, which concerned the culmination of two years of investigations into the US exchange, but it will certainly have welcomed the platform’s decision to align itself with international law and turn off the taps with Moscow.

Kraken thus realigns with the will of the law and while giving up an important slice of the market closes Russian-European relations not without consequences.

Coming to the rescue of the platform’s lost gains, however, is a growing adoption of Bitcoin and its sisters around the world as evidenced by Chainalysis’ periodic report on the spread and use of digital currencies around the world.

Indeed, the research highlighted a major growth in the use of Bitcoin and its companions for trading and holding transactions, but also growth in the Non-Fungible Token sphere.

The exponential growth applies to the whole planet, but Europe in particular stood out for results (compared to 2021) with the United Kingdom among the top six countries in the world in terms of use and capitalization and the first in Europe, although also the performance of Spain, Germany, and Italy (sixth place among the countries of the old continent) should be highlighted.

George Michael Belardinelli

A former corporate manager at Carifac Spa and later at Veneto Banca Scpa, blogger and Rhumière, over the years he has become passionate about philosophy and the opportunities that innovation and the media make available to us, in particular the metaverse and augmented reality

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