For the crypto industry, pro-sanctions are a rebranding opportunity

One of the first punitive measures taken in response to Russia's military invasion of Ukraine was the imposition of economic sanctions aimed at isolating Russia from the international financial system. On March 12, Russian banks were unable to use the international payment and information network SWIFT, and private payment companies such as Visa, PayPal and MasterCard followed suit with sanctions. However, despite the swift response to the crisis from these highly regulated and publicly scrutinized institutions, concerns soon emerged that the Russian government, and the companies and oligarchs associated with it, could turn to digital currency exchanges as a backdoor to evade sanctions .

The Bank of England and the Financial Conduct Authority have asked crypto firms to impose sanctions on their platforms, and central banks and regulators around the world have joined the ranks. Recently, Japan announced that it will amend the Foreign Exchange and Foreign Trade Law, aiming to broaden its scope and apply it to crypto assets. This means exchanges will be required to assess whether their customers are targets of sanctions.

However, some of the most prominent cryptocurrency exchanges are still dragging their feet, unwilling to abide by the lines drawn by global policymakers and regulators. Binance, Coinbase, and Kraken have all expressed sympathy for the plight of the Ukrainians, and some exchanges have frozen some accounts linked to sanctioned individuals, but none of them have exited Russia, nor have they stopped all funds flowing in and out of Russia.

As the CEO of the largest cryptocurrency exchange in Poland, I understand the moral dilemma they face, between free market ideals and moral responsibility. But with the devastating human tragedy unfolding in Eastern Europe, we must do more as an industry to condemn violence by banning them from our platforms. At Zonda, we did not take the decision to pull out of Russia lightly, but we did make it quickly and in doing so voted for peace, transparency, and respect for the spirit of global regulation. Failure to do so will lead many around the world to perceive it as indifference at best and supportive at worst.

Crypto exchanges are standing at an ethical crossroads

The Ukraine conflict has exposed tensions at the heart of cryptocurrency ideology. The original vision of a digital currency was to create a decentralized global financial system free from financial tinkering by governments, central banks, and large financial services firms. Yes, there are many reasons why we should explore decentralization, especially in pursuit of greater transparency, accountability, and security. But we can't let this quest for financial independence in its purest form lead us down a dark path, leading us to believe that the laws of this country -- moral or otherwise -- don't apply to us. Ideological support for decentralization can never justify consciously facilitating criminal activity.

As an industry, we should be asking ourselves what kind of world we want to create where our ethics drive our actions. The Russian invasion of Ukraine is an undeniable violation of international law, and the indiscriminate targeting of Ukrainian civilians in places like Mariupol is not a moral gray area.

greater risk of marginalization

The current crisis calls for a joint and collaborative response from every corner of every industry and provides a rare window for the global crypto industry to come together and act in unison. The cryptoasset industry should do more to demonstrate that it takes the activity that takes place under its roof seriously. This could include freezing the accounts of users in Russia and Belarus and denying applications for new accounts by consumers in those regions. In fact, I think this is our best chance of getting rid of some of the crime that continues to plague our industry.

The price of Bitcoin (BTC) has skyrocketed over the past few years, and a big factor driving this trend is wider integration with the broader financial services industry. Failure to understand the crisis could jeopardize the trust the crypto industry has built with regulators, policymakers, and consumers in recent years. It will signal to these stakeholders that it sees itself as completely disconnected from their mission, and indeed from the real world.

Of course, there are commercial factors at play here too. Companies that demonstrated a sense of shared purpose and ethical values to their customers experienced 14.1% higher revenue growth and 34.7% higher annualized shareholder returns than the average company. The crypto industry is no exception, and as the war continues in Ukraine, companies that fail to act quickly to support victims will be remembered for it.

Can regulation solve the problem?

The Financial Stability Board announced in February that it would develop a global regulatory framework for crypto-assets, the first step toward international homogeneous guidelines. Meanwhile, the U.S. Securities and Exchange Commission has unveiled a plan to regulate other trading systems that will allow regulators to investigate crypto platforms and even decentralized finance protocols.

As it stands, there is no indication that the regulations will force economic sanctions, but they will introduce further checks and balances, increase transparency of funds flowing through digital asset exchanges, and further deter illicit activity. But it’s no secret that regulators are trying to catch up with the rapid pace of innovation in the crypto space, and we shouldn’t wait for them to catch up to do the right thing. We have a responsibility to carry the torch for the reputation of an industry we love.

Cointelegraph Chinese is a blockchain news information platform, and the information provided only represents the author's personal opinion, has nothing to do with the position of the Cointelegraph Chinese platform, and does not constitute any investment and financial advice. Readers are requested to establish correct currency concepts and investment concepts, and earnestly raise risk awareness.