Russian Capital Flees To Dubai Through Crypto

Cryptocurrency companies located in the United Arab Emirates (UAE) are seeing an unprecedented influx of requests from Russian customers who wish to liquidate billions of dollars worth of cryptocurrency as the Russian ruble plunges due to increasingly harsh economic sanctions.

What Happened: A Friday Reuters report explained that some of those Russian nationals are looking to invest in UAE real estate while others are just looking to turn crypto into fiat currency and keep it abroad.

An executive of an unspecified firm said the company "received lots of queries in the past 10 days" from Swiss brokers looking to move the capital due to fears that Switzerland will soon freeze the assets. Astonishingly, none of the requests was for less than $2 billion.

The anonymous executive said the company has "had like five or six in the past two weeks." Still, not one of those clients has come off yet — which he admits is not rare. Still, he recognizes that "we've never had this much interest."

He commented, "We have one guy — I don't know who he is, but he came through a broker — and they're like, 'We want to sell 125,000 bitcoin.' And I'm like, 'What? That's $6 billion guys.' And they're like, 'Yeah, we're going to send it to a company in Australia.'"

While Switzerland's financial market supervisor declined to comment on cryptocurrency transaction volumes, the country's economic affairs secretariat (SECO) purportedly said crypto assets were subject to the same sanctions and measures Switzerland has imposed on "normal" Russian assets and individuals. Consequently, if a person is sanctioned their cryptocurrency assets are supposed to be frozen just like their fiat money holdings.

A representative of an unspecified real estate broker who accepts cryptocurrencies said that they have "been seeing a lot of Russians and even Belarusians coming to Dubai and bringing whatever they can bring, even in crypto."

A UAE-based financial source confirmed to Reuters that Russians are buying property in Dubai using crypto as a way to get their money out of Russia and into the country.

Three western diplomats purportedly said that they are increasingly alarmed by the number of Russians seeking refuge in the UAE; two of them also said they were skeptical that the UAE would crack down on Russian wealth. The Financial Action Task Force put the UAE on a grey list for increased monitoring looking for financial crime — citing risks in certain industries, including real estate agents and precious metals dealers. 

As Benzinga reported earlier this month, major U.S. cryptocurrency exchange Coinbase Global Inc COIN explained that traditional methods are much more suitable for sanction evasion than crypto since actors aiming to circumvent sanctions would find cryptocurrencies impractical since they would need “virtually unobtainable amounts of digital assets." Similarly, the U.S. Treasury admitted on Monday that sanctions-busting using crypto was "not necessarily practicable."

According to Reuters, two sources familiar with the matter confirmed UAE companies had reputational concerns about doing business with Russians, they also feel like the state's abstention at the U.N. Security Council was a signal they should not impose restrictions on Russians. The country has strong ties to Russia and has seen Russians be among the top visitors and purchasers of real estate even before the war.

Apurv Trivedi of Healy Consultants, which advises on setting up businesses, said that he found Russian clients "basically trying to protect themselves against the inflationary pressures that are happening against the Russian currency." He explained that "crypto has been a very good exit for them to manage the risks that they're facing" since "it's a good liquidity provider for them."

Photo by Kanchanara on Unsplash

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Posted In: Financial Action Task ForceRussiaSwitzerlandUAEUnited Arab EmiratesCryptocurrencyNewsGlobalTop StoriesMarkets

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