New EU sanctions ban crypto services for Russians over Ukraine escalation

By: Michael Wilson

October 8, 2022 2:39 AM

The most recent set of EU-approved sanctions against Russia affect a wide variety of services related to cryptocurrencies. As a response to Moscow's annexation of Ukrainian territory, these measures are part of a broader effort to tighten economic and financial restrictions.

Because of the escalating military conflict in Ukraine, the EU Council decided to impose new sanctions on Russia. After Moscow moved to annexe the Ukrainian regions of Donetsk, Luhansk, Zaporizhzhia, and Kherson, the international community has responded with sanctions that are expected to hurt the Russian government and economy.

EU Foreign and Security Policy Chief Josep Borrell said in a statement that the sanctions are in response to the "fake referenda" held in these four oblasts. Anyone and anything Russian that has helped them organize will be fair game.

The cryptocurrency industry in Russia, along with other Russian citizens and businesses, will suffer as a result. Among the new restrictions is a blanket ban on offering wallet, account, or custody services for cryptocurrency to individuals based in Russia. That's in accordance with Brussels' eighth set of sanctions, which doesn't take into account the value of these holdings.

When the European Union approved its fifth set of such measures this spring, the Council only banned the sale of "high-value" crypto-asset services to Russian citizens and entities. The restriction applied to any digital currency with a value greater than €10,000 (nearly $11,000 at the time).

Russian exports and imports will be impacted by new European sanctions.

A recent report found that pro-Russian groups have been actively using cryptocurrency, often in small transactions, to fund paramilitary operations in Ukraine, despite the earlier restrictions' intention to limit the transfer of wealth through digital assets and close other loopholes in the crypto space. Studies show that since the invasion began in late February, they have collected approximately $400,000 in cryptocurrency. The Russian government has also been making preparations to legalize the use of cryptocurrency in international trade.

With this latest action, the EU has also barred the export of architectural, engineering, and information technology consulting services to Russia. Russian imports and exports have also been a target, as has the shipping of crude oil and petroleum products to countries outside the European Union. Only services purchased at or below a yet-to-be-determined price ceiling will be authorized for provision.

A ban on EU nationals serving in leadership roles in certain Russian state-owned or government-controlled companies is among the other measures. The Council also agreed to expand the categories of people who can be labeled as aiding in the violation of EU sanctions. The Brussels-based European Commission hailed the most recent round of sanctions as a positive development.