March 2, 2022
Photo: Wojtek Radwanski/AFP via Getty Images
Good morning, and welcome to Protocol Fintech. This Wednesday: weaponizing wire transfers, Satish Kumbhani disappears, and Hillary weighs in on crypto.
Crypto has been dominating the headlines, and it’s understandable, given the novelty of the first crypto war. But it’s a little early to write off fiat currency, which is going to play a far more decisive role in this conflict. That’s why I asked Tomio to take a look into how the traditional money-transfer business was responding to sanctions and other disruptions. Read on for more.
— Owen Thomas (email | twitter)
There’s been a keen focus on the role of crypto in the war between Russia and Ukraine, both as a means of bypassing sanctions against Russia and potentially helping Ukraine. Lost in that discussion is how the conflict is affecting the far larger and, frankly, more important flows of fiat currency.
The West’s sanctions haven’t generally prohibited sending ordinary Russian citizens money, but sanctions don’t make it easy. The U.S. and other countries have imposed a variety of restrictions on Russia’s financial sector, and have said they will shut down SWIFT messaging for certain Russian banks. All of that complicates operating the financial machinery to execute a transfer.
Some companies are acting to shut down the movement of money to Russia. It’s just not always clear why.
Some companies cited sanctions compliance. Personal ties and corporate obligations may also have influenced some companies’ responses.
Moving money is not easy in Ukraine either. With people trying to get out and others sending funds for aid, there are a host of complications.
Expect more attention on these financial flows. Sanctions and various other measures are just starting to be implemented, which will affect companies and individuals alike.
Effects like these help explain some of the early hesitations around sanctions: Western governments wanted to target sanctions to Putin and his inner circle, not ordinary Russian citizens. With the crisis deepening, it’s inevitable that these small, everyday transactions will see disruption, too. “It has such a huge ripple effect,” Brue said.
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On Protocol: Mastercard and Visa announced they blocked multiple Russian financial institutions on the U.S. sanctions list. The list includes Russia’s central bank, Sberbank and VTB Bank.
Electric Capital raised $1 billion. The venture capital firm plans to fund crypto networks, Web3 protocols and blockchain-enabled businesses, and will continue to invest between $1 million to $20 million in equity and tokens in Web3 areas.
The European Parliament scrapped a bitcoin ban from a draft of its crypto regulation bill. In an effort to accelerate the passage of the Markets in Crypto-Assets bill, lawmakers dropped a section of the bill that banned crypto services from trading coins based on proof-of-work over environmental impact concerns. That measure would have essentially banned bitcoin and ether.
BitConnect founder Satish Kumbhani has disappeared. After being charged by the SEC with allegedly defrauding U.S. investors for over $2.4 billion, Kumbhani vanished from his native India. Officials’ efforts to locate him have been unsuccessful.
A DebtHammer survey found that “buy now, pay later” plans have fueled debt burdens. According to the survey, 32% of BNPL users have had to skip paying an essential bill to make their payments. Even after skipping a bill, 30% still struggled to make BNPL payments.
Chris Lehane, chief strategy officer of KRH Partners and former Airbnb policy chief, thinks that Web3 is the future of democracy. “We are seeing how the rapid deployment of tech in defense of freedom can make it possible for anyone, anywhere to contribute to a 21st-century version of WWII's Arsenal of Democracy,” he wrote in a Twitter thread.
Jake Chervinsky, head of Policy at the Blockchain Association, doesn’t think that crypto can save Russia, and outlined the reasons why in a long Twitter thread. “Setting aside valid privacy concerns, the transparency of public ledgers + the analytics capabilities of US forensics firms = crypto is useless for sanctions evasion,” he tweeted.
Hillary Clinton, however, still thinks that crypto exchanges need to put economic pressures on Russia, and she’s not happy with the response so far. “I was disappointed to see that some of the so-called crypto exchanges, not all of them, but some of them are refusing to end transactions with Russia for some philosophy of libertarianism or whatever,” she said in an interview.
Harmse, who describes himself as having “fallen down the crypto rabbit hole” on Twitter and LinkedIn, is managing director and co-founder of BVNK, a digital assets financial services company.
What fintech trend is most troubling for you?
I wouldn’t say it’s troubling us, but we have a close eye on regulatory developments. When new technologies emerge and authorities look at how to regulate them, they try to fit them in existing frameworks. In the U.S., we’re seeing that this approach is leading to several authorities with different remits staking a claim to regulating the crypto sector. This piecemeal approach is unhelpful.
The situation in Europe is more straightforward with a pan-European Union approach. The EU may not be able to match the entrepreneurial energy of the U.S., but its consistent approach is positive for the sector.
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Thanks for reading — see you tomorrow!