Crypto intelligence firm Inca Digital published a report alleging that cryptocurrency, particularly the stablecoin Tether, has been used to break Russian sanctions via cryptocurrency exchanges. It states that Huobi and KuCoin allow transactions for their P2P platforms that use sanctioned Russian banks for deposits. He makes a similar allegation about Binance, but obtained the data from ‘Digital Intelligence Assets Within Russia’ rather than directly.

Inca’s clients include the Department of Defense, the CFTC and Fidelity.

The main allegations relate to peer-to-peer (P2P) markets where exchanges provide the platform instead of major cryptocurrency exchanges.

According to Inca, Binance “offers multiple methods for Russians to convert local currency into crypto, namely their exchange, OTC desk, and a Peer to Peer (P2P) marketplace. Each of these options is fully open to Russians without KYC (know your customer) for a deposit amount equal to $10,000, but is easily circumvented after that amount.” It alleges that the transactions can be disguised by showing payments to companies from Non-Russian public services.

It confirms that Binance does not support Russian cards or sanctioned bank accounts for the main crypto exchange. In a statement, Binance refuted the allegations saying that it is a full KYC platform.

Inca analyzed mentions of crypto exchanges on Russian social media. Shortly after the outbreak of the Ukrainian war, the top mentions were Binance, KuCoin, and Bybit, in that order. Binance’s share increased to around a third in May 2022. From August to October, KuCoin led mentions on social media before another Binance emerged during November 2022.

Initially, sanctions were imposed on the largest crypto transactions following the outbreak of the war between Russia and Ukraine, for wallets that held more than €10,000. In October 2022, Europe expanded sanctions to all cryptocurrency wallets, accounts, and custodial services, regardless of amount, to prevent local businesses from circumventing sanctions.

The Russian government and even Putin have been very vocal about wanting to use crypto to evade sanctions, but the Bank of Russia does not support it. Instead, there is talk of using Russian digital financial assets (real world tokenized assets) and the possibility of cross-border CBDC. Reports indicate that work is beginning on the sovereign digital currency for international payments in the current quarter.