EU bans all Russian crypto wallets and payments in new sanctions package

by Arthur · October 8, 2022

To further tighten its economic sanctions against Russia for invading Ukraine, the European Union has announced a complete ban on crypto payments to Moscow.

“The existing bans on crypto-assets have been tightened by banning all crypto-asset wallets, accounts or custody services, regardless of the wallet amount (previously up to €10,000 was allowed),” the European Commission said in an October. 6 press release. The new measures have been introduced as part of the eighth sanctions package and will thus stop all crypto payments between Russia and the EU.

The ban came into effect on Thursday. The only Russian entities and citizens allowed to acquire services from European crypto providers will be those living or operating in the EU bloc.

The new EU move comes as Russian officials have decided to allow cross-border cryptocurrency settlements. The Russian central bank and the Ministry of Finance have “as a whole” agreed on a bill to this effect, according to a report by the Russian-based publication Kommersant.

Russia also plans to launch a digital ruble next year and use it for mutual settlements with China. In an interview with Russia’s parliamentary newspaper last month, Anatoly Aksakov, head of the finance committee in Russia’s lower house of parliament, pointed out that digital currencies will allow financial flows that bypass systems controlled by nations hostile to Russia.

“If we launch this, other countries will start using it actively going forward, and US control over the global financial system will effectively end,” Aksakov said.

Funding war with crypto

An Oct. 7 report by TRM Labs, a digital asset compliance and risk management firm, identified pro-Russian groups that are collecting donations in cryptocurrencies to fund Moscow’s war on Ukraine. As of September 22, such groups have raised approximately $400,000.

An analysis of Telegram posts revealed that the funds raised are being used to support combat training near Russia’s Ukraine border, as well as buying supplies for militias affiliated with Moscow.

One of the paramilitary groups collecting donations is Task Force Rusich, a Russian entity sanctioned by the US Treasury’s Office of Foreign Assets Control (OFAC). Since the beginning of the Ukraine invasion, Task Force Rusich has raised more than $144,000 in funds.

In an interview with CNBC, Ari Redbord, head of legal and government affairs at TRM Labs, said such pro-Russian groups likely use crypto exchanges that may not comply with anti-money laundering and other similar regulations.

“They are probably using non-compliant exchanges to liquidate these funds [into fiat currency]”, said Redbord. “And you can do it. You just can’t do it on a large scale. And I think there’s … we’ll say, will there be more? Of course there will be more. But will it be billions of dollars? Highly unlikely.”