As the ruble cascaded over crypto from Russia, Binance was capitalized – Forbes | Omd Cialis

In 2018, Nikolai Mendiaev bought his first bitcoin through a peer-to-peer platform called LocalBitcoin
Bitcoin
S. Mendiaev lived in Elista, a town of about 100,000 in southern Russia, and he shied away from going through the know-your-customer process on a central exchange. As a software developer and (relatively) early adopter of cryptocurrencies, Mendiaev occasionally had friends and family asking him how they could buy Bitcoin.

“It was a rare case, but it happened,” says Mendiaev.

Then, in March, Russian President Vladimir Putin declared war on Ukraine. As Russian tanks traversed the vast eastern plains of Ukraine, Mendiaev moved to Tbilisi, Georgia. He also found more Russians coming to him with questions about how to get into crypto. Most wanted to send money across the Russian border, says Mendiaev. Mendiaev sent most of them to Binance despite its problems with centralized exchanges. He felt that the platform’s own peer-to-peer service would make it easier for his friends to conduct cross-border transactions.

Russian traffic to crypto exchanges skyrocketed in the early days of the Ukraine invasion, as Russians exchanged billions of dollars worth of rubles for bitcoin and tether in March and April. Volume has declined in recent months, but Russia remains an important market for any crypto exchange. It has also become a more complicated market as sanctions and harsh responses from payment providers have made it difficult to buy crypto in Russia. The story follows a familiar framework as citizens of emerging markets flock to crypto during times of instability. However, these buyers also face the challenge of living in a country whose weak currency can make it difficult to buy Bitcoin, Tether, or other cryptos.

“The most important quality of an exchange is that it is available to Russians because it is difficult to find a good exchange now,” says Mendiaev.

Binance has dominated the cryptocurrency exchange space in Russia for years. But competition increased dramatically after the war began, and Binance has seen its market leader shrink. As of August 2021, Binance controlled 62% of Russian Traffic to crypto exchanges, according to Forbes analysis of data from SimilarWeb, a web analytics service. That number fell to 33% just before the invasion, rose to 44% in March and has since fallen to a record low of 27%.

Exchanges Bitrue and Bybit are the only others that bring in at least 10% of web traffic, but it’s unclear how much trading volume they control.

“Binance is #1, but then there’s a bunch of these really small exchanges that probably have very limited volumes,” says Clara Medalie, head of research at digital asset data provider Kaiko in Paris. On Aug. 2, Tether/Ruble trading volume on Binance hit $2.14 million, while BitGlobal had the second-highest total at just under $400,000.

As Binance’s share of the Russian pie shrinks, so does the size of that pie. Trading volume between Tether and the ruble peaked in early March, reaching 4.3 billion rubles on March 7. Bitcoin/Ruble volume hit over 2.1 billion on the same day. The volume has since been much smaller, generally in the tens and hundreds of millions of rubles a day.

It’s difficult to pinpoint the exact cause of this drop, although the aftermath of sanctions over the invasion of Ukraine is a logical place to look. The effects are largely indirect. After several measures by the EU and the US Office of Foreign Assets Control (OFAC), around 1,200 Russian nationals were sanctioned.

Some observers predicted that crypto would allow Russian oligarchs to evade sanctions, but evidence supporting this claim does not seem to have surfaced. The surge in activity in March and April was mainly driven by individuals fleeing the falling ruble. Crypto exchanges can still operate legally in Russia as long as they do not support sanctions evasion by any of the listed individuals.

“Exchanges, they will never bother restricting users. They will always obey the law, but if the law allows them, they will do it,” Medalie says.

“The crypto innovators are tech companies…Tech-centric companies want to drive the market by boldly innovating,” said Chris DePow, senior policy advisor at blockchain analytics firm Elliptic. “They are willing to take more risks.”

Still, many risk-averse financial firms, particularly those outside of the crypto sector, have shut down their operations in Russia to avoid potential legal or other backlash. Visa for example
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and MasterCard
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suspended most of its Russian operations in March, a challenge for locals who used these companies’ cards to buy crypto on major exchanges. Banks and other financial institutions, including Citigroup
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Goldman Sachs, JPMorgan Chase
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and Deutsche Bank have also reduced services to varying degrees.

These banks, payment providers and other financial institutions pulling out of their country are making it difficult for ordinary Russians to access the crypto markets.

“There has to be a connection between crypto-focused businesses and traditional banks, again this deposit and withdrawal agency,” says Daniel Tannebaum, global head of sanctions at Oliver Wyman, a business consulting firm.

In the days following the March and April sanctions, crypto exchanges implemented a variety of risk mitigation strategies in their Russia operations. Binance closed all Russian accounts worth more than €10,000, giving account holders time to withdraw funds. Other exchanges had similar procedures and worked with sanctioned individuals to withdraw their funds from their platforms.

Russia’s rising interest may come as a surprise, but it follows a long-known trend for crypto to thrive in emerging markets. In a Chainalysis report on global crypto adoption, the US was the only country in the top 20 not considered an emerging market.

“People in emerging markets have always found ways to move their capital out of the country in search of a more stable currency,” says Sarah Krepps, professor of international relations and technology at Cornell University. While most cryptocurrencies haven’t been particularly stable in 2022 — Bitcoin is down more than 50% year-to-date — that hasn’t slowed the flow of ruble money into them.

“In Russia, [people] also try to get their money out of the system to relatives and friends elsewhere,” says Krepps. “People in those countries where the economy is unstable or unpredictable are trying to protect them from that volatility.”

The Russians have primarily done this by storing their funds in Tether (USDT
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), a stablecoin. Russians favored bitcoin for much of 2021 as crypto buying was fueled by price speculation. A similar movement took place in Turkey in recent years as inflation ravaged the country’s economy. Turkey is the only country with higher traffic to Binance than Russia.

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