Turkish Crypto Exchange Thodex CEO Faruk Özer Sentenced to 11,196 Years in Prison for Collapse
DeFi and Credit Risk
International Regulatory Authorities Unveil Comprehensive Global Cryptocurrency Policy Blueprint
Economic sanctions were one of the first sanctions imposed against Russia in response to its military invasion of Ukraine. The goal was to isolate Russia from the international financial system. Russian banks lost access to the international payments and messaging network SWIFT on March 12, and private sector payment providers like Visa, PayPal, and Mastercard followed suit. While these highly regulated and publicly watched organizations were fast to respond to the crisis, fears immediately grew that the Russian state, as well as firms and oligarchs linked to it, may use digital currency exchanges as a backdoor to avoid sanctions.
The Bank of England and the Financial Conduct Authority in the United Kingdom have ordered cryptocurrency companies to impose sanctions across their platforms, and central banks and regulators throughout the world have already joined the chorus of worry. Japan recently declared that its Foreign Exchange and Foreign Trade Act would be revised. This intends to broaden its scope to include crypto assets, requiring exchanges to determine whether their customers are Russian sanction targets.
Despite this, some of the most well-known crypto exchanges are still hesitant to toe the line defined by global legislators and regulators. Binance, the world's largest exchange, as well as Coinbase and Kraken, have all expressed sympathy for Ukrainians' suffering, and some have banned accounts tied to sanctioned persons, but they have all refrained from exiting Russia or banning all money flows in and out of the nation.
As the CEO of Poland's largest cryptocurrency exchange, I understand the moral ambiguity they face, torn between free-market ideals and a sense of moral obligation, but as this horrific human tragedy unfolds in Eastern Europe, we as an industry must do more to condemn the violence through access to our platforms. We at Zonda did not take the decision to leave Russia lightly, but we did so promptly, and in doing so, we voted for peace, transparency, and adherence to global regulations. Many people around the world will interpret failure to do so as indifference at best or active support at worst.
Cryptocurrency exchanges are at a moral fork in the road
The turmoil in Ukraine has exposed a schism at the heart of cryptocurrency's ideology. Digital currencies were conceived with the goal of establishing a decentralized global financial system free of financial manipulation by governments, central banks, and huge financial services companies. Yes, there are numerous reasons why decentralization should be investigated, including the need for greater openness, accountability, and security. But we must not allow our drive for the purest kind of financial independence to take us down a dark path, believing that the laws of the land, moral or otherwise, do not apply to us. The deliberate encouragement of illegal behavior cannot be justified by ideological support for decentralization.
As an industry, we should consider what type of world we want to build and behave in accordance with our values. The invasion of Ukraine by Russia is a clear violation of international law, and the indiscriminate killing of Ukrainian citizens in places like Mariupol is not an ethical gray area.
The possibility of further marginalization
The current crisis necessitates a coordinated reaction from all sectors of the economy, and it is a once-in-a-lifetime opportunity for the global crypto community to band together and take coordinated action. The crypto asset business should do more to show that it is concerned about the behavior taking place within its walls. This could involve freezing Russian and Belarusian users' accounts and denying new account requests from these countries. In fact, I feel this is our best shot of dispelling some of the criminal connotations that still afflict our industry.
The price of Bitcoin (BTC) has soared in recent years, with growing integration into the larger financial services industry playing a major role. Failure to read the room on this crisis could jeopardize the trust that the crypto business has established with regulators, legislators, and consumers in recent years. It would send a message to these stakeholders that it perceives itself as completely disconnected from their purposes, and even from reality.
Commercial considerations are, of course, present. Companies that convey a shared sense of purpose and moral worth to their consumers see a 14.1 percent increase in revenue and a 34.7 percent increase in annualized total shareholder return. The crypto sector is no exception, and as the situation in Ukraine continues, those who failed to act quickly to assist the victims will be held accountable.
Is regulation the solution?
The Financial Stability Board said in February that it will be building a global regulatory framework for crypto assets, marking the first major step toward international uniformity. Simultaneously, the Securities and Exchange Commission of the United States announced a plan to regulate alternative trading systems, allowing authorities to look at crypto platforms and even decentralized financial protocols.
There is currently no indication that these regulations will demand economic sanctions, but they will add more checks and balances to the money flowing via digital asset exchanges, increasing transparency and discouraging unlawful activities. However, it's no secret that regulators are catching up to the fast speed of innovation in the crypto industry, and we shouldn't wait for them to do the right thing. It is up to us to uphold the industry's reputation, which we all adore.
