Chief legal officer Paul Grewal said the exchange is "committed to complying with sanctions" following Russia's invasion of Ukraine — but the exchange continues to resist a nationwide ban.
Coinbase has revealed that it has blocked more than 25,000 addresses that are connected to Russian individuals or entities that are suspected of being engaged in illicit activity.
Chief legal officer Paul Grewal said the exchange is "committed to complying with sanctions" following Russia's invasion of Ukraine — and that they have a "vital role in promoting national security."
The trading platform has faced criticism for refusing to block all Russian users, a request made by Ukraine's deputy prime minister.
Coinbase's CEO Brian Armstrong has argued that there isn't a high risk of ultra-rich oligarchs using crypto to sidestep sanctions, and that "everyone deserves access to basic financial services unless the law says otherwise." He added:
"Some ordinary Russians are using crypto as a lifeline now that their currency has collapsed. Many of them likely oppose what their country is doing, and a ban would hurt them, too. That said, if the U.S. government decides to impose a ban, we will of course follow those laws."
Grewal's blog post was designed to show that Coinbase is being proactive — and that the company "implements a multi-layered, global sanctions program."
He explained that the Coinbase checks account applications against lists of sanctioned individuals, new users need to go through identification checks, and geoblocking is used to prevent access to its website in sanctioned areas such as Crimea, North Korea and Syria.
The exchange has also taken steps to identify accounts that sanctioned individuals hold outside of Coinbase — with those, as well as the wallets they interact with — added to an internal blocklist.
And addresses identified as being involved in illicit activity through its own investigations are shared with the government "to further support sanctions enforcement."
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Dispelling Myths
Grewal went on to stress that "digital assets have properties that naturally deter common approaches to sanctions evasion" — and fiat currency laundered through traditional financial institutions remains a far more common method for sanctions evasion.
He argues that digital assets "can actually enhance our ability to detect and deter evasion" — as public blockchains offer "unprecedented visibility" into transaction histories, and these records cannot be destroyed.
Aside from all of this, Grewal stressed that the adoption of digital assets remains at an early stage, meaning it is unlikely that they would blunt the effectiveness of sanctions. As he explained:
"The Russian government and other sanctioned actors would need virtually unobtainable amounts of digital assets to meaningfully counteract current sanctions. The Russian central bank alone holds over $630 billion in largely immobilized reserve assets. That’s larger than the total market capitalization of all but one digital asset, and 5x to 10x the total daily traded volume of all digital assets."
Grewal warned that no crypto company can "guarantee that its sanction controls are completely airtight" — and there is a risk that malicious actors will "find ways" around even the strongest deterrents.
He stressed that "there is also a legitimate interest in protecting the privacy of individuals," and said the exchange's cooperation with law enforcement goes hand in hand with "promoting policy frameworks that respect individual privacy," adding:
"Coinbase helps everyday people to protect, build, and share their wealth through crypto technology. At the same time, we vigorously work to promote security, safety, and transparency on our platform, including through our commitment to sanctions compliance."
