The European Union has imposed sanctions against cryptocurrency owners from Russia. Everything is lost?

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What are the sanctions?

Literally, the European Commission statement reads as follows:

“Existing bans on crypto-currency assets have been tightened by banning all crypto-currency wallets, accounts or storage services, regardless of the number of assets in the wallet (previously it was allowed to store up to 10 thousand euros).”

This is not the first time that Russians have been restricted from accessing cryptocurrency trading platforms. By the beginning of March, Coinbase, a large American crypto exchange, blacklisted 25,000 crypto wallet addresses associated with Russian accounts. At the time, the company said that it suspected these addresses of "illegal activity" and identified them before the war, but at the same time announced its intention to comply with international sanctions. And in April, the European Commission approved the fifth package of sanctions against Russia, which contained the wording “Prohibition on the provision of expensive crypto-active services to Russia” without further clarification.

In practice, this was followed by a ban on the storage of assets worth more than 10 thousand euros from the largest crypto exchange Binance for all users who registered with a Russian passport. The limit made it possible to exchange ordinary currency for crypto without any problems and withdraw money. If at the same time the amount of the balance on the exchange did not exceed 10 thousand euros, gradually through it it was possible to withdraw at least a billion from it to a personal wallet or from it. At the same time, smaller exchanges - such as FTX, KuCoin and Huobi - did not introduce any special restrictions for Russians.

Another restriction on cryptocurrency trading was the disabling of Russian Visa and Mastercard cards. Because of this, it became impossible to directly replenish the wallets of crypto exchanges with ordinary currency and withdraw assets to the card. The Russians circumvented this restriction with the help of p2p trading, that is, the exchange of cryptocurrency between individuals. Crypto exchanges in this case act only as platforms for announcements and intermediaries that ensure the security of the transaction.

Now the EU will block all wallets?

No! We are talking about different wallets.

The statement of the European Commission may affect wallets that are used for trading on the stock exchange. Technically, it belongs to the platform with which you signed the license agreement when creating your account (for example, Binance or Coinbase). The site has the right to impose any restrictions - just like, for example, Facebook or Instagram can ban any account. Money on such wallets is indeed under the threat of sanctions. Therefore, it is safer to transfer funds from there immediately after the transaction on the exchange to another, personal crypto wallet.

The safest storage method is a personal crypto wallet. A wallet is an address on the blockchain that only its owner has access to. This access may be through various intermediary programs, but they do not control transactions in such wallets. Here are some examples of such wallet programs: Trust Wallet , Exodus , Mycelium . In addition to programs, there are also “cold” wallets - separate devices that are not connected to the Internet, for those who are especially concerned about security, such as Ledger or Trezor .

When generating a wallet, a set of keys appears - public and private. The public one allows anyone to see what transactions were carried out with a particular address in the blockchain. Thus, you can find out the balance of any wallet. But the private key that allows these operations to be carried out remains only with the owner. Neither the manufacturer of software for accessing the wallet, nor the exchange from which funds were transferred to the wallet, nor the creators of the blockchain, nor any other regulators know it. Therefore, even if someone manages to prove that one specific wallet belongs to a person with a Russian passport, no one can forbid him to conduct transactions.

It is also important that the crypto wallet market is highly competitive, there are dozens of services and new ones are constantly appearing. And the main value for cryptocurrency users is anonymity. Therefore, when creating a crypto wallet through their software, such services almost never require registration with a passport, phone number, and so on.

Will the new sanctions change anything?

For personal crypto wallets - most likely nothing. The money will remain safe. Those who already had a wallet remain anonymous to the wallet programs they use. Even if their identity somehow turns out to be established - for example, during a judicial investigation - and the wallet-program blocks its functions - this does not change anything. The wallet owner can use the passphrase (it is generated when the wallet is created and is known only to the owner) to restore access to it through any other wallet program and continue to use the assets.

Popular wallet programs may begin to require new users to register with a passport, taking away their anonymity in advance. But that would make their offer uncompetitive, and there would be a dozen anonymous alternatives. The experience of the previous package of sanctions shows that these services are not ready to give up anonymity due to the requirements of regulators, and the new package is unlikely to change their policy in any way.

But it is better to withdraw currency from accounts on large exchanges. If your money remains on the balance of the same Binance, there is a risk that the site will restrict access to it. However, this should not happen in one day. After the introduction of past restrictions, the platform gave the Russians 90 days to reduce the amount in the account.

At the same time, it will become more difficult and less safe for Russians to trade cryptocurrencies. Most likely, the largest crypto exchanges will comply with the new EU requirements, as they did before. Trading for users who have passed verification with a Russian passport may stop altogether. It is possible that Binance and other platforms will come up with tools that allow you to continue trading p2p without holding cryptocurrency on the platform’s account — for example, it will be transferred immediately from an external wallet to another external wallet. This will reduce the security of such trading, as the mechanism of “freezing” the cryptocurrency will disappear until the closing of the transaction is confirmed. One way or another, it is worth preparing for the fact that trading as before will no longer work.

Most likely, there will be smaller cryptocurrency exchanges that will not fully comply with EU requirements, as was the case with the last package of sanctions.

In addition, in addition to exchanges, you can trade currency using exchangers : there are a lot of them, not all of them are safe, but they definitely will not comply with the requirements of the European Commission. Most of them work for one market - for example, the Russian one - and for them to ban transactions with Russians would mean closing.

And how now to use cryptocurrency?

If you already have assets on your personal crypto wallets, do not rush to immediately withdraw everything. You definitely won’t be able to take away your bitcoins and USDT (analogue of the dollar in the crypt), you will have to change the wallet program at most. So check if you have the seed phrase written down in a safe place to restore it.

If your crypto reserves are on the exchange, but you don’t need them in the near future, transfer them to your personal crypto wallet.

If you urgently need the currency, explore alternative withdrawal methods. Register on small or oriental-oriented exchanges with p2p platforms, such as OKX , Huobi , K uCoin . As a last resort, even if all the exchanges you know drastically limit transactions, use exchangers or find a person who is ready to buy cryptocurrency from you for ordinary money. The ability to simply transfer coins from one address to another cannot be taken away from you as long as you remember the passphrase to access the wallet.