Binance, the world’s biggest cryptocurrency exchange, told Russian customers on Thursday (April 21) that all accounts with over 10,000 euros (about $10,800) will be shut down, reports PYMNTS.com.
Binance claimed in its statement that this is due to the European Union’s fifth sanctions package and that it anticipates other exchanges to fall in line.
The announcement stated that while these sanctions may be burdensome for ordinary Russian people, Binance must proceed to lead the industry in enforcing them.
The EU’s latest sanctions against Russia for its invasion of Ukraine were announced on April 8, which included a “prohibition on supplying high-value crypto-asset solutions to Russia” to close “possible loopholes.”
The cryptocurrency limit was only 10% of the existing 100,000-euro deposit limit for ordinary cash accounts. Russian citizens who live outside the country are subject to both sets of financial restrictions.
“Cryptoization” Can Be A Threat To The Economy, IMF Warns
Binance’s announcement comes just two days after the International Monetary Fund (IMF) warned that the growing “cryptoization” of economies poses a danger to regulators’ power to apply penalties.
It also demanded that bitcoin be subjected to the same capital-control regulations as conventional currencies.
However, because of crypto’s lower cutoff limit, not only will it be more difficult to use cryptocurrency and other digital assets to escape sanctions, but it will also be more difficult to use them to make payments.
There are various reasons for this, the most obvious of which being that merchants’ ability to take crypto will be constrained — at least through existing crypto payment channels — because their accounts may quickly reach the limit. There’s also no guarantee that the cap won’t be lowered even more.
Of course, cutting down transactions by exchanges or other virtual asset service providers (VASPs) doesn’t make it impossible to make or receive payments; this can be done with a simple crypto wallet or by using DeFi exchanges that do not adhere to anti-money laundering (AML) or sanctions regulations because there is no efficient management to enforce them.
And while software wallets and fully-offline hardware wallets are harder if not impossible to restrict, they are more complex than the larger exchange’s accounts, which — AML verification aside — are generally as simple as setting up an account at any digital payments service. That could prove a formidable barrier to tech-averse, would-be crypto users.
And they have their weaknesses, such as software wallets’ vulnerability to hacking and hardware wallets’ vulnerability to being lost.