Ukrainian soldiers Mykhailo (L) and Pavlo builds a bunker on the front line on December 12, 2021 in Zolote, Ukraine.
Ukrainian soldiers builds a bunker on the front line on.Photo by Brendan Hoffman/Getty Images
  • Ukraine's deputy prime minister called on crypto exchanges to block all Russian addresses on Sunday.
  • It's time to "sabotage ordinary users," he said, after Western allies imposed new sanctions on some Russian banks.
  • Kraken's CEO pushed back against the call, saying the exchange can't freeze accounts without a legal requirement.

Ukraine's vice prime minister has called on crypto exchanges to block the accounts of Russian customers as the Russia-Ukraine crisis escalated over the weekend. 

"I'm asking all major crypto exchanges to block addresses of Russian users," Mykhailo Fedorov said on Twitter on Sunday.

"It's crucial to freeze not only the addresses linked to Russian and Belarusian politicians, but also to sabotage ordinary users," he added.

On Saturday, Western powers moved to isolate Russia from the global financial system, by removing some of its banks from the SWIFT banking system. They also put restrictive measures on the Russian central bank's $630 billion in international reserves — paralyzing its assets, according to EC President Ursula von der Leyen.

Russians rushed to withdraw foreign currencies from bank ATMs as the ruble sank nearly 30% against the dollar. With access to those currencies limited, decentralized and unregulated crypto transactions become potentially more attractive, analysts say. 

But some crypto exchanges pushed back against the Ukrainian minister's call, as proponents of digital currencies reacted negatively.

"I understand the rationale for this request but, despite my deep respect for the Ukrainian people, Kraken cannot freeze the accounts of our Russian clients without a legal requirement to do so," Kraken CEO Jesse Powell said on Twitter early Monday.

"Russians should be aware that such a requirement could be imminent," he added.

In his six-part Twitter thread, Powell pointed out the requirement for Russians could be imposed by their own government — as seen in Canadian authorities' response to crypto fundraising for the trucker blockade — or by foreign states like the US, to turn Russians against their leaders.

"Besides, if we were going to voluntarily freeze financial accounts of residents of countries unjustly attacking and provoking violence around the world, step 1 would be to freeze all US accounts," the crypto exchange founder said.

"As a practical matter, that's not really a viable business option for us."

Crypto exchange Binance also rejected the suggested move, telling Bloomberg that it wouldn't unilaterally freeze the accounts of millions of innocent users as this would fly in the face of cryptocurrency's principles. 

While Binance refused to this request it has committed to donating at least $10 million to support Ukraine during the invasion, and created a crypto-first crowdfunding site to provide aid to Ukraine. 

Insider's live blog of the invasion is covering developments as they happen.

Read more: What does Russia invading Ukraine mean for markets? 13 investing experts share their outlook on the Fed's likely response, short- and long-term trades, and whether bitcoin can ever become a 'safe-haven' asset

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