Crypto firms in the United Arab Emirates (UAE) are inundated with requests to liquidate billions of dollars in virtual currencies as Russians seek a safe haven for their fortunes, company executives and financial sources said.
Some clients use cryptocurrency to invest in real estate in the UAE, while others want to use companies there to convert their virtual money into hard currency and store it elsewhere, the sources said.
A crypto firm has received many inquiries in the past 10 days from Swiss brokers asking to liquidate billions of dollars in bitcoin because their customers fear that Switzerland will freeze their funds, an executive said, adding that none of the requests are for less than $2. billion.
“We’ve had about five or six of these in the last two weeks. None of them have come out yet – they fell over a bit at the last minute, which is not rare – but we’ve never had this much interest,” the director said, adding that his company normally receives an application for a large transaction once a month.
“We have one guy – I don’t know who he is, but he came through a broker – and they said ‘we want to sell 125,000 bitcoin’. And I’m like, ‘what? That’s $6 billion guys’. And they say, ‘yes, we’re going to send it to a company in Australia,'” said the director.
The Swiss financial market regulator declined to comment on cryptocurrency transaction volumes.
The country’s Secretariat for Economic Affairs (SECO) said in an emailed statement that crypto assets were subject to the same sanctions and measures that Switzerland has imposed on “normal” Russian assets and individuals, so if a person is sanctioned, their crypto assets must also be frozen in Switzerland.
Dubai, the financial and business center of the Gulf and a growing crypto hub, has long been a magnet for the world’s ultra-wealthy, and the UAE’s refusal to take sides between Western allies and Moscow has signaled to the Russians that their money is safe there.
One broker, whose company partners with a cryptocurrency service to help people buy real estate, said, “We have seen many Russians and even Belarusians come to Dubai and take everything they can bring, even in crypto.”
AWAY FROM SANCTIONS?
A financial source in the UAE confirmed that Russians were buying real estate in Dubai, using crypto to get their money from other jurisdictions and into the Gulf state.
Cryptocurrency exchanges have said, while providing little detail, that they are blocking the accounts of Russians sanctioned by the West over Moscow’s invasion of Ukraine, which Russia calls a “special operation.”
Major exchanges such as Coinbase Global Inc and Binance say they are taking steps to ensure crypto is not used as a sanctions evasion tool, and are working with law enforcement officers in this area.
But as crypto offers users a high degree of anonymity, European countries such as Germany and Estonia have this week called for stricter surveillance to close any loopholes that allow sanctions to be broken.
Three Western diplomats said they were increasingly alarmed by the number of Russians seeking refuge in the UAE in recent weeks for their fortunes, including property, and wary that some could act on behalf of those under sanctions.
Two of the diplomats said they were skeptical that the UAE would crack down on Russia’s Gulf state wealth, which they say was held mainly in Dubai, citing the country’s neutral stance in the conflict.
A third said he hoped the UAE, which is also a gold trading center, understood the implications for its reputation and would take action.
The UAE was put on a “grey list” this month due to increased surveillance by financial crime and money laundering watchdog, the Financial Action Task Force (FATF).
The FATF cited risks in certain sectors, including real estate brokers and precious metal dealers. Dubai passed a virtual asset law this week and established a regulator. The UAE regulator said it was close to enacting regulation and has held consultations on money laundering risks in the sector.
The Dubai Government Media Agency and the UAE Central Bank did not immediately respond to requests for comment.
The UAE’s Foreign Ministry said it had no further comment than previous statements that the government has a “strong commitment” to work with the FATF on areas to improve its anti-money laundering and terrorist financing regime.
MARINA AND DOWNTOWN
Some experts say the relative transparency of cryptocurrency transactions, which are recorded in the blockchain ledger underlying bitcoin and other tokens, makes large-scale sanctions evasion difficult.
The US Treasury said Monday that lifting sanctions using crypto was “not necessarily enforceable” and called for vigilance from companies in the industry.
Two sources familiar with the matter said UAE companies had a reputation for doing business with Russians but found the state’s abstention from the UN Security Council, when Russia vetoed a resolution banning the invasion of Ukraine was condemned, a signal that they should not impose restrictions on the Russians. †
The UAE, which has deepened ties with Russia over the years, has failed to match the sanctions imposed by Western countries and the central bank has not issued any guidance regarding the measures.
An attractive tourist destination, Dubai has long been popular with Russians, who were among the largest visitors and buyers of property even before the war and subsequent sanctions rocked the Russian economy.
Apurv Trivedi of Healy Consultants, who advises on setting up businesses, including crypto firms, said they had certainly gained more interest from Russian clients.
“They are basically trying to protect themselves from the inflationary pressures that are taking place against the Russian currency. So crypto has been a very good exit for them to manage the risks they face,” Mr Trivedi said. “It’s a good liquidity provider for them.”
Healy’s Sami Fadlallah said much of the money coming out of Russia has gone to Dubai’s real estate, citing both industry talks and their company’s experience.
“People are parking their money in dozens of apartments in the Marina, Downtown,” Fadlallah said.
“We have seen many Russians hedge their bets against the ruble devaluation by moving a lot of assets into crypto. And the UAE is relatively generous in terms of regulations and authorities in transferring crypto here.”