Binance, the world’s largest crypto platform, has removed sanctioned Russian banks from its list of allowed institutions when transacting via P2P or peer-to-peer. The list includes Sberbank, VTB, and Rossiya. This development comes after the exchange was accused of inadvertently helping Russians move money overseas.
Russia and several Russian institutions have been slapped with sanctions after the invasion of Ukraine. The US and its allies have imposed various sanctions on Russia to pressure it to withdraw its troops from Ukraine. One of these sanctions is to exclude Russian banks from SWIFT (Society for Worldwide Interbank Financial Telecommunications), an international payment system that facilitates cross-border money transfers. This made it hard for Russia to transact international trades and move funds.
How Does P2P Work and Why Was Binance in Hot Water?
In regular exchange transactions, the customer would usually buy and sell crypto in the spot market with the listed market price. Exchanges, like Binance, would take the payment and deposit the crypto into the customer’s wallet. However, in P2P transactions, customers buy and sell directly from each other. The seller or buyer would set the price and would wait for another user to agree and complete the transaction. Users will also specify how they want to get paid like bank transfers or card payments. Binance would just act as an intermediary to make sure that the users would abide by the conditions. Binance would also usually escrow the digital assets until the transaction is completed.
This type of transaction is revolutionary and puts the power in the hands of consumers. But can also be used to skirt sanctions. In Russia’s case, users can simply move funds easily by using the P2P marketplace. For example, a sanctioned entity cannot use SWIFT to move money overseas. This entity can simply ask a partner abroad to open a Binance account and use the P2P marketplace to send funds. Nobody is stopping them from exchanging $1 million for a 1 million meme coin that is worth a lot less.
What now?
In 1999, Peer-to-peer P2P was introduced to internet users with the release of Napster, a file-sharing application. Users were able to share music files over the internet, a breakthrough during that time. In 2009, Satoshi Nakamoto created Bitcoin as an alternative to traditional finance. This also paved the way for P2P transactions whenever users wanted to send something of value. P2P is meant to bypass a central authority that might impede the exchange of assets.
A P2P marketplace is supposed to be the epitome of a free market, but we live in a world where certain rules should be followed, whether we like it or not. Binance has been under scrutiny lately and delisting the banks is a smart move, unless it wants financial regulators to make things even harder.
In the end, crypto is just a tool. It is up to the user how it will be used. And honestly, it is no different from fiat. Fiat money as we know it has been around for a long time, and it is used for all sorts of illegal transactions. However, crypto is better at stopping illegal activities due to blockchain records. Any transaction done is permanently recorded on-chain. Try to do that with a duffle bag filled with cash.
Source: WSJ
