The blocked Russian addresses stem from government-supplied information as well as Coinbase's own investigations, its chief legal officer, Paul Grewal, said in a blog post Sunday. The post described the steps Coinbase Global Inc. takes to head off bad actors, as government officials raise the alarm that cryptocurrencies might be used to dodge the latest sanctions over Russia's invasion of Ukraine.
"No compliance program is perfect, including ours," Grewal said. "But to play our part in these critical economic sanctions, Coinbase implements a multi-layered, global sanctions program."
That system includes checking account applications against sanctions lists maintained by the U.S., the U.K., the E.U., Singapore, Japan and others, the post said. The company has also developed ways to identify non-Coinbase accounts held by sanctioned individuals and uses blockchain analytics to track down addresses potentially linked to those who've been sanctioned, the post said.
"Today, Coinbase blocks over 25,000 addresses related to Russian individuals or entities we believe to be engaging in illicit activity, many of which we have identified through our own proactive investigations," Grewal said. "Once we identified these addresses, we shared them with the government to further support sanctions enforcement."
A Coinbase representative told Law360 on Monday that the company has not seen any surge in activity following Russia's invasion of Ukraine.
Lawmakers and regulators have been diving into crypto's role in the Ukraine crisis. A group of Democratic senators last week asked the U.S. Treasury Department to detail its plans for ensuring sanctioned individuals and entities don't use cryptocurrencies as a sanctions dodge, and the New York Department of Financial Services said it's hastening its plans to acquire blockchain analytics technology to address similar concerns.
Grewal argued that, contrary to many lawmakers and government officials' concerns, cryptocurrencies are actually harder to use for sanctions evasion than many other methods such as fiat currency, gold or fine art.
Grewal noted that blockchains, which record digital-asset transactions, are publicly visible and transaction records can't be removed or altered retroactively. While accounts are pseudononymous, blockchains nevertheless detail the moment of each transaction, the transaction amount and the digital asset used — all in one place, the post said.
Grewal also defended Coinbase's previously stated stance that the company will not issue a blanket ban on all Russian users. Several other major cryptocurrency exchanges, such as Binance and Kraken, have taken that position as well.
"Sanctions play a vital role in promoting national security and deterring unlawful aggression, and Coinbase fully supports these efforts by government authorities," the post said. "Sanctions are serious interventions, and governments are best placed to decide when, where and how to apply them."
--Additional reporting by Al Barbarino and Dorothy Atkins. Editing by Gemma Horowitz.
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