CZ’s Blog Addresses Sanction Issues in Depth

CZ addresses four important topics related to the ongoing Russian incursion and Binance’s response to it.

Binance Applies Sanctions

Changpeng Zhao (CZ), the Chief Executive Officer (CEO) of Binance in a blog on March 4, dealt with some tough questions on Ukraine, Russia, sanctions, and crypto. 

Source: CZ clarifies that Binance is applying sanctions according to international rules on sanctions

The first point that CZ address is the misconception that Binance is not applying sanctions. He clarifies that Binance applies the same sanction rules as Banks. These rules are according to international standards. 

However, Binance stops one step short of sanctioning/freezing Russian users’ assets. Binance upholds the position that it is not authorized to do so. The unilateral decision to freeze assets is not something that a business organization or platform should do. This decision can only be carried out by a government supported by legislation, legal enforcement, or military intervention.  

CZ highlights the following scenarios to justify Binance’s stance. He said

‘Should a bank CEO in London have the power to unilaterally decide to freeze those people’s assets? On what grounds? Just because they don’t agree with the President of their country? What happens if they also do not agree with another head of state in another country? Should they have the power to freeze all assets of citizens of that other country too? Where does this stop?’ 

Focus is on Banks

The blog also addresses the misdirected focus on crypto by media and politicians. Only 0.3% of the global net worth is in crypto assets. Stopping 0.3% will not tilt the needle. Sanctions are better applied by focussing on banks, oil/gas, or other means. 

Putin-led government is trying to block access to crypto in order to prevent the devaluation of its ruble. Russia is not seeing crypto as an escape route. Even if this is not true and Russia chooses crypto as its path to circumvent sanctions, stopping a few international crypto exchange platforms will not have any impact. 

Source: Moscow is unlikely to turn to crypto as a means of avoiding sanctions, as it would cause the collapse of its own currency

Many smaller Russian exchanges can be utilized and liquidity will not be an issue as users are driven to these exchanges providing immediate liquidity.

The final point that CZ makes is the mere fact that cryptos can be traded even without central exchanges. All that the Russians need is a wallet that can be downloaded to use for goods and services. 

Binance’s Limitations

CZ did however concede that if governments include new sanction that includes off-boarding users, Binance will have to apply these rules. Binance is regulated in many jurisdictions, hence instructions from the authorities must be carried out. 

CZ illustrates his point by giving the following example, 

‘So, should Binance block crypto to all Russians unilaterally? Let me ask this another way. Should a coffee shop in Paris refuse to serve a Russian customer? Or take their wallet while they’re at it? The answer to that is no. We are not going to unilaterally freeze millions of innocent users’ accounts.’ 

Sanctions if indiscriminately applied, will only affect the innocent victims. This includes Russian civilians that are not a part of these acts of aggression.

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