Russia’s financial system has been hit hard by sanctions and the exodus of key international companies. Russian users of cryptocurrencies also found themselves in a new reality.
How Russian crypto investors react to the difficult situation in the economy, can cryptocurrencies replace the usual dollars for Russians against the backdrop of currency restrictions and become a new way to transfer funds abroad, read the Cryplogger material.
The reaction of crypto exchanges to the outbreak of war
Following the sanctions, foreign crypto exchanges introduced various restrictions on users from Russia and Belarus.
Ukrainian Kuna stopped trading with the ruble and stopped working with ruble transfers. WhiteBIT has temporarily closed registration for investors from Russia. Registered in the UK, CEX.IO has suspended deposits and withdrawals for citizens of the Russian Federation and Belarus (in the Russian-language chat of the exchange emphasizedthat the restrictions are temporary). Leading platforms in South Korea have taken similar steps.
Platforms motivate their actions in different ways. Somewhere they are explained by the war in Ukraine, somewhere – by the need to follow the sanctions. After all, the United States is closely monitoring that the participants of the sanctions lists do not bypass the restrictions with the help of cryptocurrencies, and the European Union will join them in the near future.
The readiness to comply with the instructions of state authorities has already been expressed by the head of the American crypto exchange Coinbase Brian Armstrong, as well as the technical director of the Bitfinex exchange and the stablecoin Tether Paolo Ardoino. Coinbase has already blocked 25,000 accounts associated with Russians and organizations from Russia.
However, we are not talking about a complete blocking of access for all users from Russia: access to the market is blocked for persons from the sanctions list. This was also emphasized by Changpeng Zhao, the founder of the Binance exchange, which is popular in Russia.
Problems with card transfers
An additional difficulty for Russians is the withdrawal of Visa and Mastercard from Russia. Since March 11, cards of Russian banks issued by these payment systems do not work abroad. This will affect most regulated crypto exchanges and exchange services, since Russians use the services of foreign platforms exclusively.
Card deposits and withdrawals for Russian users have already been closed by Binance. However, transfers from Payeer and Advcash accounts are still available. There are no massive problems with these services, a representative of the exchange said in a conversation with Cryplogger:
“We don’t see any special complaints, everything is in working order.”
The Russian P2P section of Binance continues to work, the platform administration emphasized: the old methods of exchange are available there, except for cards of banks that fell under sanctions.
When asked if the platform plans to add the ability to transfer using Mir or UnionPay cards, a Binance representative replied that the exchange team “continues to explore the possibilities of integrating new payment systems around the world.”
EXMO exchange March 1 reported about the suspension of transactions with Visa and Mastercard cards, as well as the Qiwi service due to “network overload”, but now both replenishment and withdrawals to Russian cards of international systems work on the platform. Although the site has increased the commission for withdrawals to cards to 8%.
It should be noted that within Russia all card transactions are processed by the National Payment Card System (NSPK).
Restrictions on currency exchange and the reaction of the crypto market
Starting from February 24, the ruble exchange rate against the main world currencies began to decline sharply. The Russian authorities cannot influence this trend with the help of foreign exchange interventions due to the freezing of foreign exchange assets of the Central Bank. Therefore, the Bank of Russia resorted to restrictions on transactions with currencies within the country:
- When exchanging dollars, euros and British pounds, individuals and legal entities, with the exception of certain cases, have to pay commission of 12% of the transaction amount. It operates on both the exchange and over-the-counter markets.
- Until September 9, citizens can withdraw a maximum of $10,000 from foreign currency deposits in cash, the rest of the amount, if necessary, will be given in rubles at the current exchange rate. When withdrawing, funds will be issued only in dollars, regardless of the deposit currency.
- Exporting companies are required to sell 80% of foreign exchange earnings for rubles.
In addition, the United States banned the import of cash dollars into Russia, and the European Union banned the euro.
Against the backdrop of these measures, at least some Russian investors are choosing cryptocurrencies and stablecoins as an alternative to fiat currencies.
According to the analytical service Kaiko, in the first week after Russia’s invasion of Ukraine, the trading volume of the BTC/RUB pair on the Binance exchange reached a record of 2 billion rubles. The average transaction amount also increased significantly. However, as stated in review Kaiko dated March 7, the rise in trading activity turned out to be short-lived – the average transaction amount has already decreased.
The share of the ruble in total fiat trading volume on Binance, although it has risen to 6%, remains relatively low compared to currencies such as the euro and the Turkish lira, analysts admit.
Binance is the only TOP-10 cryptocurrency exchange that continues to trade bitcoin paired with the ruble.
The volume of ruble transactions on the LocalBitcoins P2P platform also grew after February 24, reaching the levels of the middle of last year, but still far from record values.
The EXMO administration said that their users began to replenish their accounts with rubles more actively:
“We have seen a large influx of ruble deposits over the past couple of weeks, but in general we can say that the situation does not exceed the boom of 2017.”
Participants in the Russian crypto industry also report on the activation of the black market exchange of cryptocurrencies. The head of Indefibank, Sergey Mendeleev, told Cryplogger that the turnover of online exchangers has increased several times. This information was confirmed by the founder of the aggregator of P2P-platforms for trading crypto-currencies Nikolay Bondarev.
As Nikita Zuborev, senior analyst at the BestChange aggregator, told Cryplogger, Russian users began to exchange crypto assets for cash dollars more often. At the same time, the demand for stablecoins compared to other exchange options, according to him, has not changed, although the total number of such transactions has increased in proportion to traffic growth since February 24.
Cryptocurrencies for international transfers
In addition to measures to contain the foreign exchange market inside Russia, the country’s authorities have imposed restrictions on the export of currencies in order to prevent their outflow. In particular, citizens were banned from transferring money to accounts in foreign banks and taking abroad more than $10,000 in cash, and for cross-border transfers to relatives established $5,000 per month limit.
Meanwhile, the EU government has banned banks from opening new accounts for Russians and Russian organizations in excess of 100,000 euros (with the exception of Russians with European citizenship or a residence permit).
To these measures, one can add the departure from Russia of popular services for international payments and transfers. PayPal, Western Union, Paysend, Wirex, Revolut, Wise and Remitly have already announced the suspension of work.
In such a situation, one could assume that cryptocurrencies would be a good substitute for bank transfers, because they were created, among other things, for this. And some Cryplogger interlocutors, on condition of anonymity, confirmed that now digital assets have become more actively used to withdraw capital from Russia. However, so far these are “isolated cases that are almost impossible to notice in the general flow of requests,” Nikita Zuborev is convinced:
“Such options for cross-border transactions were practiced even before the current crisis, but this phenomenon was not widespread and is unlikely to be. The general specifics of the cryptosphere, high requirements for technical literacy and insufficient popularization will not allow the crypto market to become an alternative to the traditional financial system in Russia in the near future. In addition, most restrictions [западных] governments concern a narrow circle of people, at the household level they are almost invisible.
The opinion that cryptocurrencies can become a way to circumvent sanctions was refuted by Yuri Brisov, a lawyer at Legal Support:
“Popular cryptocurrencies leave a digital footprint and getting around the law with BTC or ETH is almost impossible. Only transactions for the smallest amounts remain invisible to regulators.”
Brisov said that now Russian residents are withdrawing funds to “friendly countries outside of Russia”: Kazakhstan, Armenia, Georgia and Azerbaijan, and “advanced citizens” to Hong Kong or the UAE.
“Basically, the withdrawal of assets is now being carried out to non-custodial crypto wallets. The volume of payments directly for cryptocurrencies has increased. Apparently, citizens of the Russian Federation, as well as other persons affected by recent political events, are not in a hurry to withdraw funds to fiat, ”the lawyer is sure.
And yet, sanctions may contribute to the introduction of more lenient regulation of cryptocurrencies in Russia, the expert believes:
“If Russian legislators and the regulator act promptly, most of the virtual assets will return to the Russian economy. Now this is practically the only chance for Russia to survive under the heaviest burden of reorganization.”
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Russia’s financial system has been hit hard by sanctions and the exodus of key international companies. Russian users of cryptocurrencies also found themselves in a new reality.
How Russian crypto investors react to the difficult situation in the economy, can cryptocurrencies replace the usual dollars for Russians against the backdrop of currency restrictions and become a new way to transfer funds abroad, read the Cryplogger material.
The reaction of crypto exchanges to the outbreak of war
Following the sanctions, foreign crypto exchanges introduced various restrictions on users from Russia and Belarus.
Ukrainian Kuna stopped trading with the ruble and stopped working with ruble transfers. WhiteBIT has temporarily closed registration for investors from Russia. Registered in the UK, CEX.IO has suspended deposits and withdrawals for citizens of the Russian Federation and Belarus (in the Russian-language chat of the exchange emphasizedthat the restrictions are temporary). Leading platforms in South Korea have taken similar steps.
Platforms motivate their actions in different ways. Somewhere they are explained by the war in Ukraine, somewhere – by the need to follow the sanctions. After all, the United States is closely monitoring that the participants of the sanctions lists do not bypass the restrictions with the help of cryptocurrencies, and the European Union will join them in the near future.
The readiness to comply with the instructions of state authorities has already been expressed by the head of the American crypto exchange Coinbase Brian Armstrong, as well as the technical director of the Bitfinex exchange and the stablecoin Tether Paolo Ardoino. Coinbase has already blocked 25,000 accounts associated with Russians and organizations from Russia.
However, we are not talking about a complete blocking of access for all users from Russia: access to the market is blocked for persons from the sanctions list. This was also emphasized by Changpeng Zhao, the founder of the Binance exchange, which is popular in Russia.
Problems with card transfers
An additional difficulty for Russians is the withdrawal of Visa and Mastercard from Russia. Since March 11, cards of Russian banks issued by these payment systems do not work abroad. This will affect most regulated crypto exchanges and exchange services, since Russians use the services of foreign platforms exclusively.
Card deposits and withdrawals for Russian users have already been closed by Binance. However, transfers from Payeer and Advcash accounts are still available. There are no massive problems with these services, a representative of the exchange said in a conversation with Cryplogger:
“We don’t see any special complaints, everything is in working order.”
The Russian P2P section of Binance continues to work, the platform administration emphasized: the old methods of exchange are available there, except for cards of banks that fell under sanctions.
When asked if the platform plans to add the ability to transfer using Mir or UnionPay cards, a Binance representative replied that the exchange team “continues to explore the possibilities of integrating new payment systems around the world.”
EXMO exchange March 1 reported about the suspension of transactions with Visa and Mastercard cards, as well as the Qiwi service due to “network overload”, but now both replenishment and withdrawals to Russian cards of international systems work on the platform. Although the site has increased the commission for withdrawals to cards to 8%.
It should be noted that within Russia all card transactions are processed by the National Payment Card System (NSPK).
Restrictions on currency exchange and the reaction of the crypto market
Starting from February 24, the ruble exchange rate against the main world currencies began to decline sharply. The Russian authorities cannot influence this trend with the help of foreign exchange interventions due to the freezing of foreign exchange assets of the Central Bank. Therefore, the Bank of Russia resorted to restrictions on transactions with currencies within the country:
- When exchanging dollars, euros and British pounds, individuals and legal entities, with the exception of certain cases, have to pay commission of 12% of the transaction amount. It operates on both the exchange and over-the-counter markets.
- Until September 9, citizens can withdraw a maximum of $10,000 from foreign currency deposits in cash, the rest of the amount, if necessary, will be given in rubles at the current exchange rate. When withdrawing, funds will be issued only in dollars, regardless of the deposit currency.
- Exporting companies are required to sell 80% of foreign exchange earnings for rubles.
In addition, the United States banned the import of cash dollars into Russia, and the European Union banned the euro.
Against the backdrop of these measures, at least some Russian investors are choosing cryptocurrencies and stablecoins as an alternative to fiat currencies.
According to the analytical service Kaiko, in the first week after Russia’s invasion of Ukraine, the trading volume of the BTC/RUB pair on the Binance exchange reached a record of 2 billion rubles. The average transaction amount also increased significantly. However, as stated in review Kaiko dated March 7, the rise in trading activity turned out to be short-lived – the average transaction amount has already decreased.
The share of the ruble in total fiat trading volume on Binance, although it has risen to 6%, remains relatively low compared to currencies such as the euro and the Turkish lira, analysts admit.
Binance is the only TOP-10 cryptocurrency exchange that continues to trade bitcoin paired with the ruble.
The volume of ruble transactions on the LocalBitcoins P2P platform also grew after February 24, reaching the levels of the middle of last year, but still far from record values.
The EXMO administration said that their users began to replenish their accounts with rubles more actively:
“We have seen a large influx of ruble deposits over the past couple of weeks, but in general we can say that the situation does not exceed the boom of 2017.”
Participants in the Russian crypto industry also report on the activation of the black market exchange of cryptocurrencies. The head of Indefibank, Sergey Mendeleev, told Cryplogger that the turnover of online exchangers has increased several times. This information was confirmed by the founder of the aggregator of P2P-platforms for trading crypto-currencies Nikolay Bondarev.
As Nikita Zuborev, senior analyst at the BestChange aggregator, told Cryplogger, Russian users began to exchange crypto assets for cash dollars more often. At the same time, the demand for stablecoins compared to other exchange options, according to him, has not changed, although the total number of such transactions has increased in proportion to traffic growth since February 24.
Cryptocurrencies for international transfers
In addition to measures to contain the foreign exchange market inside Russia, the country’s authorities have imposed restrictions on the export of currencies in order to prevent their outflow. In particular, citizens were banned from transferring money to accounts in foreign banks and taking abroad more than $10,000 in cash, and for cross-border transfers to relatives established $5,000 per month limit.
Meanwhile, the EU government has banned banks from opening new accounts for Russians and Russian organizations in excess of 100,000 euros (with the exception of Russians with European citizenship or a residence permit).
To these measures, one can add the departure from Russia of popular services for international payments and transfers. PayPal, Western Union, Paysend, Wirex, Revolut, Wise and Remitly have already announced the suspension of work.
In such a situation, one could assume that cryptocurrencies would be a good substitute for bank transfers, because they were created, among other things, for this. And some Cryplogger interlocutors, on condition of anonymity, confirmed that now digital assets have become more actively used to withdraw capital from Russia. However, so far these are “isolated cases that are almost impossible to notice in the general flow of requests,” Nikita Zuborev is convinced:
“Such options for cross-border transactions were practiced even before the current crisis, but this phenomenon was not widespread and is unlikely to be. The general specifics of the cryptosphere, high requirements for technical literacy and insufficient popularization will not allow the crypto market to become an alternative to the traditional financial system in Russia in the near future. In addition, most restrictions [западных] governments concern a narrow circle of people, at the household level they are almost invisible.
The opinion that cryptocurrencies can become a way to circumvent sanctions was refuted by Yuri Brisov, a lawyer at Legal Support:
“Popular cryptocurrencies leave a digital footprint and getting around the law with BTC or ETH is almost impossible. Only transactions for the smallest amounts remain invisible to regulators.”
Brisov said that now Russian residents are withdrawing funds to “friendly countries outside of Russia”: Kazakhstan, Armenia, Georgia and Azerbaijan, and “advanced citizens” to Hong Kong or the UAE.
“Basically, the withdrawal of assets is now being carried out to non-custodial crypto wallets. The volume of payments directly for cryptocurrencies has increased. Apparently, citizens of the Russian Federation, as well as other persons affected by recent political events, are not in a hurry to withdraw funds to fiat, ”the lawyer is sure.
And yet, sanctions may contribute to the introduction of more lenient regulation of cryptocurrencies in Russia, the expert believes:
“If Russian legislators and the regulator act promptly, most of the virtual assets will return to the Russian economy. Now this is practically the only chance for Russia to survive under the heaviest burden of reorganization.”
Subscribe to Cryplogger news in Telegram: Cryplogger Feed – the entire news feed, Cryplogger — the most important news, infographics and opinions.
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