As nations worldwide continue to sanction Russia in condemnation of their invasion of Ukraine, companies have now joined the movement to exclude the Russian government — and sometimes Russians— from their list of clients.
Some of these companies have decided to ban them as a recommendation to the international sanction provisions from The Office of Foreign Assets Control (OFAC).
Others have taken this decision as a show of solidarity with the Ukrainian people. However, not all fintech companies are placing blanket boycotts on Russian citizens. The most notable holdouts are Binance and Kraken, who cite the argument that banning “innocent Russians” goes against the philosophy behind cryptocurrencies.
So, let’s go through the reactions of fintech companies to the Russian invasion and explore how they affect the socio-economic climate in Russia and the rest of the world.
Although banning SWIFT stops these Russian banks from accessing their global economic resources, the country has outlined measures to combat the hard-hitting impacts of the SWIFT suspension.
In anticipation of incoming economic sanctions, the Russian government developed SPFS (System for Transfer of Financial Messages) — a SWIFT equivalent that works only in Russia and some banks in Switzerland, Kazakhstan, Azerbaijan, Cuba, and Belarus.
According to Statista, VISA owns 12% of all credit payment cards in the world (335 million credit cards), accounting for about 50% of the overall market shares.
The company reacted to the Russian invasion by halting all its operations within Russia and banning Russian VISA cardholders from processing transactions.
Mastercard has maintained the same ironclad stance as VISA on the Russian invasion. The credit card company has reportedly forfeited about 4% of potential revenue by excluding Russians from its services.
American Express has also joined the ranks of Visa and Mastercard in suspending all operations in Russia and Belarus.
Despite being under no obligations to react, PayPal has taken the initiative to join other world-renowned payment services in halting all operations in Russia until further notice.
Payoneer’s reaction to the Russian aggression was to stop all issuance of cards to customers with postal or residential addresses within the Russian Federation.
According to the company’s updated FAQs, Russian citizens with Payoneer cards issued outside Russia can still conduct transactions without restrictions.
As a company with a Ukrainian co-founder Vlad Yatsenko, Revolut has provided unwavering support for the Ukrainians suffering from the war.
The current CEO Nikolay Storonsky, born in Russia to a Ukrainian father, released an open letter, categorically condemning the war, saying that “this war is wrong and totally abhorrent” and that “…not one more person should die in this needless conflict.”
In a statement titled “The War on Ukraine: Our Response,” Revolut has affirmed its dedication to uphold and impose sanctions placed on Russia.
As part of its support to Ukraine, Revolut has removed transfer fees for every transaction going into the country. The company has also pledged to match every donation made to the Red Cross Ukraine appeal.
Apple (Apple Pay) and Google (Google Pay)
Apple and Google set rivalries aside to impose a collective ban on the Russian government and its citizens for their actions in Ukraine.
According to NPR, Apple will stop shipping products to Russia with immediate effect. This announcement sent shockwaves around the tech world because of the company’s global influence.
In the same vein, Google has also removed media platforms RT and Sputnik from its services, banning their content within EU countries.
But that’s not even half of it. Apple has furthered its crackdown on Russia by deactivating its payment service Apple Pay in the region — 29% of Russians rely on Apple Pay for contactless payments.
Similar to Apple, Google Pay (used by 20% of Russians) has also ceased all digital payments by Russian citizens within occupied territories.
Money transfer services
According to Statista, the value of cross-border money transfers made by Russians in 2020 were worth over $40 billion, which is by almost $8 billion less than in 2018.
In 2022, however, this sum is likely to be much lower taken the situation with the money transfer services that are leaving the Russian market.
On March 10, 2022, Western Union issued a press release announcing that all the company’s operations in Russia and Belarus will be suspended with immediate effect.
For the people of Ukraine, Western Union has created a donation portal to address the humanitarian and refugee crisis, according to Elizabeth Executive Director of the Western Union Foundation.
Before the 2022 Russian-Ukrainian war, Wise (formerly TransferWiser) had already placed a 200 USD limit for Russian account owners.
According to Quartz, MoneyGram still works both in Ukraine and Russia since the sanctioned banks — Sberbank (Russian) and VTB — are not involved in the transactions directly. This same report also shows that, on the first day of the invasion, US-based remittances to Ukraine spiked 120%, while the number rose to 50% in Russia.
Nevertheless, MoneyGram has removed all fees on transfers going to Ukraine from the US, Canada, and EU.
“The Big Four”
Members of the Big Four — Deloitte, Ernst & Young, KPMG, and PwC — have also enforced the sanctions imposed on Russia by the US and EU nations.
At the time of compiling this report, the aforementioned companies are not in a hurry to impose blanket sanctions on all Russian citizens since a combined 1.1% (around 13000 people) of their global workforce is in Russia.
The crypto world
Although the major players in fintech are equivocal in their condemnation and boycott (full or partial) of Russia, the crypto community maintains partial neutrality.
The overarching sentiment within the world of crypto is that private citizens should not suffer due to the actions of their governments. After all, some of these individuals might be using cryptocurrencies to oppose these tyrannical regimes.
Notwithstanding, the Russian Central Bank has proposed a ban on mining and trading cryptocurrencies. With Russia occupying third place among Bitcoin mining regions globally, the impacts on the value and volatility of the crypto market might be extensive.
On its part, Ukraine has also used crypto assets to fund its defense against Russian aggression.
Ukraine’s Deputy Prime Minister Mykhailo Fedorov has also posted wallet addresses for the Ukrainian Army and Civil Defense support.
Here are the reactions of specific crypto exchanges to the sanctions and proposed boycotts.
CEO of Kraken, Jesse Powell released a Twitter thread in response to the Ukrainian Prime Minister’s call on crypto exchanges to block addresses of all Russian users.
Binance CEO, Changpeng Zhao, released a detailed statement refuting claims that “Binance doesn’t apply sanctions.” He expressed that Russian individuals banned by US and EU sanction regulations are not allowed to trade on Binance.
KuCoin CEO Johnny Lyu also refuses to freeze the accounts of Russian users, unless there is a legal precedent to do so on a case-by-case basis.
In a statement to CNBC, the CEO expressed KuCoin’s stance on the issue:
“As a neutral platform, we will not freeze the accounts of any users from any country without a legal requirement. And at this difficult time, actions that increase the tension to impact the rights of innocent people should not be encouraged.”
According to Coinbase’s Chief Legal Officer Paul Grewal, the company has blocked over 25000 accounts linked with “illicit activity” with the Russian government and its allies.
While the crypto exchange is dedicated to helping the Ukrainians, they refused to freeze the assets of “ordinary Russians.”
Nevertheless, Coinbase has implemented measures to monitor attempts by sanctioned individuals to evade the restrictions. The crypto exchange will also follow recommendations that align with government recommendations, provided they don’t interfere with individual rights.
The loan management platform Mintos has removed loans from Russian and Ukrainian lending platforms as a “cautionary measure” to protect lenders from the unprecedented repercussions of the invasion.
The Russo-Ukrainian war has plunged the entire financial sector into a new reality, which follows the post-pandemic inflation. We are now wittnessing the unprecedented situation – financial institutions and fintech companies are reacting in real time to impose sanctions and boycotts on Russia and its citizens.
Numerous companies that aren’t obliged by law or sanctions, take the initiative to leave the Russian market. These decisions cost each of them a significant part of revenue, yet they demonstrate the willingness to pay this price in order to help stop the atrocious war. United in an effort to protect democracy, they put human values above their economic interests.
As Russia continues to get more isolated from the rest of the world, Kremlin is using this opportunity to boost isolationist systems like Mir and SPFS. In the long run, it looks like Russia will continue to suffer from the fallout of these sanctions and boycotts.