Binance CEO following Russia sanctions 'very closely'

Binance CEO Changpeng Zhao stressed Friday his cryptocurrency exchange is following all sanctions rules "very closely" amid the Russia-Ukraine war.

Zhao provided insight on "Cavuto: Coast to Coast" as concerns mount that Russia could reportedly use crypto to evade Western sanctions, according to NPR.

"We follow all the sanction rules," Zhao told host Neil Cavuto, pushing back on the idea that banks sanction Russian users while crypto exchanges do not. 

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"I think there's a misunderstanding that people think we don't sanction those people on the sanction list. That will be bad and people will go to jail for that so we follow the sanction list very, very closely," he said.  

U.S. sanctions announced by President Biden target Russian financial institutions, especially two of the country's largest banks. That hits nearly 80% of the banking assets in Russia, according to Treasury officials.

Some argue that to get around those sanctions, Russian banks and oligarchs could put money into Bitcoin and other cryptocurrencies. Lawyers say going that route still has complications, especially when trying to turn the cryptocurrency back into a regular currency in order to spend it.

Business partners would also have to agree to accept digital currency for payments.

At best, experts see it as a short-term solution.

Washington is considering cryptocurrencies as a novel area for possible further sanctions against Russia.

Zhao said that while governments so far have not asked for added sanctions from the industry, others, including journalists, are "calling for our business to make a blanket ban on all Russian users who are not on the sanction list published by the U.S. government."

"Banks do not block normal Russian users, and we don't do that either so we are doing the exact same thing as banks," he said. "We feel that as a business, we don't have the power to do that."

Zhao argued a person could be "a normal Russian user maybe walking the streets of New York or London."

"We should not have the ability to say, ‘Hey, we're going to freeze this Russian guy's account'," he said.

Cavuto asked Zhao exactly how his exchange can distinguish between a Russian oligarch, Russian President Vladimir Putin and the "everyday man and woman who's just investing in crypto." 

Zhao responded by point to the "very mature" and sophisticated ways to detect money laundering activity and perform safety measures, including what’s called "Know Your Customer" (KYC), which is a standard due diligence process used by financial services companies to evaluate and monitor customer risk.

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Targeting Russia's access to cryptocurrencies such as Bitcoin and Ethereum would take sanctions policy into uncharted territory. Blocking transactions would be challenging, since by nature private, digital currencies are designed to exist without borders and for the most part outside the government-regulated financial system.

The Biden administration is in the early stages of exploring the area, with the aim of disrupting economic activity in the country, The Wall Street Journal reported Friday, citing an administration official. Sanctions on Russia's crypto activities would need to be crafted in a way that didn't destroy the broader crypto market, which may make imposing them difficult, the official reportedly said.

Regulators' attempts to have greater oversight of crypto transactions in recent years could give governments leverage, for instance, to ask crypto exchanges and brokerages to block transactions in certain countries or with certain government-issued currencies, such as the ruble.

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FOX Business’ Ken Martin contributed to this report.