Ukraine makes clarion call for Crypto Crackdown against Russia

The Ukrainian government escalated its rhetoric against Russian crypto users on Sunday, saying it was time to “sabotage ordinary users.” Vice Prime Minister Mykhailo Fedorov said on Twitter that he was asking “all major crypto exchanges to block addresses of Russian users.” He had earlier solicited information about digital wallets associated with Russian and Belorussian politicians, saying that the Ukrainian crypto community was ready to offer a “generous reward” to anyone who provided tips.

The government has already used Twitter to draw in millions of dollars worth of crypto donations and posted in online hacker forums that it is looking for help in protecting against cyberattacks.

While it was initially unclear how the biggest exchanges would respond to Fedorov’s latest call, the CEOs of several of them have publicly shared their support for Ukraine since the Russian invasion. On Sunday, a verified Twitter handle associated with Binance posted that the exchange was donating $10 million “to help the humanitarian crisis in Ukraine,” and an affiliate, the Binance Charity Foundation, launched a fund to provide emergency relief through crypto crowdfunding.

In response to Fedorov’s tweet, a Binance spokesperson told Bloomberg by email that the exchange would not “unilaterally freeze millions of innocent users’ accounts” as this would “fly in the face of the reason why crypto exists.”

“However, we are taking the steps necessary to ensure we take action against those that have had sanctions levied against them while minimizing impact to innocent users,” Binance said. “Should the international community widen those sanctions further, we will apply those aggressively as well.”

Elsewhere, DMarket, a crypto platform for trading non-fungible tokens and items related to gaming and the metaverse, said it severed all relationships with Russia and Belarus and froze the existing accounts of users from those countries.

Artem Afian, a Ukrainian lawyer managing the effort to get information about politicians’ accounts, plans to publish a list of politicians’ addresses and share it with top crypto exchanges. The goal, Afian said, is to mark these addresses as “toxic” and discourage people and businesses from transacting with them.

“We want them to understand that they are not welcome in Ukraine or in crypto,” he said. Afian said private donations toward a fund for tips have been mainly in Ether, as well as Bitcoin and other cryptocurrencies.

The data will also be shared with blockchain analytics firm Chainalysis, according to Afian. The company tweeted Friday that it is monitoring whether Russian actors are using crypto transactions to evade economic sanctions.

“To the extent that cryptocurrency may be used to evade sanctions related to this crisis, it likely would have happened slowly over the past several months,” Caroline Malcolm, head of international policy at Chainalysis, told Bloomberg in an email Sunday. “Any information on relevant wallet addresses will be added to our products and available to our partners immediately.”

Western nations, including the U.S., agreed Saturday to disconnect some Russian banks from SWIFT, a messaging system used for transactions between thousands of banks around the world. The move is just the latest in a series of international sanctions designed to isolate Russia from the global financial system. These measures are ratcheting up pressure for Russians to find alternative ways to move their wealth around, with crypto as a potential option.