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As we reported earlier this week, most popular crypto exchanges have declined requests by western officials to cut off all Russian customers, as crypto trading volume soared as investors appeared to front-run expectations for massive capital outflows as sanctions bite.

While most trading denominated in Russia rubles has been taken place on Hong Kong-based Binance, even popular US exchanges like the publicly traded Coinbase have refused to cut off all Russian users – at least, for the moment.

And for the first time since this “controversy” first emerged, Coinbase CEO Brian Armstrong has spoken up to offer an explanation. And that explanation is that millions of ordinary Russians are now using crypto “as a lifeline” to preserve their hard-won assets during a time when the Russian ruble, and other Russian assets, are being mercilessly devalued.

“Some ordinary Russians are using crypto as a lifeline now that their currency has collapsed. Many of them likely oppose what their country is doing, and a ban would hurt them, too,” Armstrong said.

As Armstrong pointed out, Coinbase is obligated to comply with US sanctions, like any other US-based business. But until sanctions stipulate otherwise, the exchange will continue providing services to the Russian people (excluding those whose names have wound up on the US Treasury’s sanctions list).

And bitcoin’s public blockchain, a feature of most cryptocurrencies, makes it an ill-suited avenue for Russian oligarchs looking to protect their billions, he added.

See the full thread below:

1/ We’ve been seeing some questions/discussion around whether crypto can be used to avoid sanctions. A few thoughts…

— Brian Armstrong – barmstrong.eth (@brian_armstrong) March 4, 2022

2/ Every US company has to follow the law – it doesn’t matter if your company handles dollars, crypto, gold, real estate or even non financial assets. Sanctions laws apply to all US people and businesses.

— Brian Armstrong – barmstrong.eth (@brian_armstrong) March 4, 2022

3/ So it would be a mistake to think crypto businesses like Coinbase won’t follow the law. Of course we will. This is why we screen people who sign up for our services against global watchlists, and block transactions from IP addresses that might…

— Brian Armstrong – barmstrong.eth (@brian_armstrong) March 4, 2022

4/ …belong to sanctioned individuals or entities, just like any other regulated financial services business.

— Brian Armstrong – barmstrong.eth (@brian_armstrong) March 4, 2022

5/ That being said, we don’t think there’s a high risk of Russian oligarchs using crypto to avoid sanctions. Because it is an open ledger, trying to sneak lots of money through crypto would be more traceable than using U.S. dollars cash, art, gold, or other assets.

— Brian Armstrong – barmstrong.eth (@brian_armstrong) March 4, 2022

6/ This is not just my opinion btw — experts at the US Treasury and NSC agree. For example: https://t.co/OVEKkMTCRO

— Brian Armstrong – barmstrong.eth (@brian_armstrong) March 4, 2022

7/ In addition, we are not preemptively banning all Russians from using Coinbase. We believe everyone deserves access to basic financial services unless the law says otherwise.

— Brian Armstrong – barmstrong.eth (@brian_armstrong) March 4, 2022

8/ Some ordinary Russians are using crypto as a lifeline now that their currency has collapsed. Many of them likely oppose what their country is doing, and a ban would hurt them, too. That said, if the US government decides to impose a ban, we will of course follow those laws.

— Brian Armstrong – barmstrong.eth (@brian_armstrong) March 4, 2022

9/ Sanctions are a complex issue, and the situation is changing fast, so we’ll keep working with law enforcement and governments, and will take more steps as needed. We’ll also of course keep working to enable crypto services for the people of Ukraine who are in need of help.

— Brian Armstrong – barmstrong.eth (@brian_armstrong) March 4, 2022

Armstrong’s Twitter comments reflect those from Binance CEO Changpeng “CZ” Zhao, who said on Wednesday that it would be “unethical” for his exchange to restrict all Russians. “It’s not our decision to make whether to ban Russians…we just follow rules, we don’t make them. Also, just from an ethical point of view, many Russians don’t support this war.”

Does this leave crypto on the “wrong side” of the norms? Not necessarily, CZ said.

“We’re doing exactly what their recommendations are.”

Just like all major banks and any other financial institutions.

And as strategists from Citi explained earlier this week, while the potential for capital flight from Russia remains high, trading volumes (although impressive-looking on the chart) have been relatively small in absolute terms so far (around 210 bitcoin per day on average).

This suggests that the price action is more due to investors positioning for an expected uptick in demand from Russia, rather than Russian demand itself, and furthermore, it underlines the reality that bitcoin and crypto more broadly are being treated like a ‘boogeyman’ by Western officials.