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Coinbase blocks 25,000 crypto wallets tied to Russians suspected of illicit activity

March 7, 2022, 10:53 PM UTC

Coinbase, the largest U.S. crypto exchange, said on Sunday that it had blocked more than 25,000 wallet addresses related to Russian individuals or entities it believes to have engaged in illicit activity.

A crypto wallet address is the unique set of numbers and letters associated with a crypto wallet in which a person can hold cryptocurrencies like Bitcoin or NFTs.

Paul Grewal, Coinbase’s chief legal officer, said in a blog post that the company has also shared the addresses with the U.S. government to help it with sanctions enforcement, which includes bans of financial transactions by a number Russians and Russian companies. The sanctions started 2014 after Russia’s annexation of the formerly Ukrainian-controlled Crimean peninsula and were ratcheted up following Russia’s full-scale invasion of Ukraine two weeks ago.

Following that invasion, a flood of users in both Ukraine and Russia shifted to using crypto, according to Bloomberg. Some Russian citizens have moved their money into cryptocurrencies to protect it against the plummeting value of the ruble while Ukrainians did so after their government declared martial law and suspended e-money transactions,  including Venmo and PayPal.

But a Coinbase spokesperson said in a statement that the company had flagged most of the Russian-linked accounts based on their activity before the war started. The spokesman added there has been no increase in sanction-evading activity on the service since the invasion.

At least publicly, many cryptocurrency exchanges are resisting pressure from both Ukraine’s government and U.S. and European politicians to ban Russian users on their platforms. 

A spokesperson for Binance, the world’s biggest cryptocurrency exchange, told CNBC that unilaterally freezing the accounts of Russian users would “fly in the face of the reason why crypto exists.” Brian Armstrong, Coinbase’s CEO, also said in a series of tweets last week that the company would not preemptively block Russian users, partly because crypto is being used as a lifeline as the Russian ruble collapses. 

“We believe everyone deserves access to basic financial services unless the law says otherwise,” he wrote in a tweet last week.

At the same time, some politicians in the U.S. and Europe are concerned that crypto could be a way for sanctioned Russians to avoid penalties. Last week Sen. Elizabeth Warren and three other democratic senators sent a letter to Treasury Secretary Janet Yellen asking for information on how the Treasury Department is ensuring crypto exchanges comply with Russian sanctions.

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