EXCLUSIVE Russians Liquidate Crypto in UAE as They Seek Safe Havens

DUBAI, March 11 (Reuters) – Crypto firms in the United Arab Emirates (UAE) are inundated with demands to liquidate billions of dollars worth of virtual currency as Russians seek a safe haven for their fortunes, executives said. company and financial sources.

Some clients are using cryptocurrency to invest in real estate in the UAE, while others want to use companies there to turn their virtual money into hard currency and hide it elsewhere, the sources said.

A crypto firm has received numerous questions over the past 10 days from Swiss brokers asking to liquidate billions of dollars worth of bitcoins because their clients fear Switzerland could freeze their assets, an executive said, adding that None of the claims had been for less than $2 billion.

“We’ve had five or six in the last couple of weeks. None of them have come out yet – they kind of dropped out at the last minute, which isn’t uncommon – but we haven’t never had so much interest,” the executive said, adding that his company normally receives a request for a large transaction once a month.

“We have a guy – I don’t know who he is, but he went through a broker – and they say, ‘we want to sell 125,000 bitcoins’. And I’m like, ‘what?’. And they were like : ‘Yes, we will send it to a company in Australia,'” the executive said.

The Swiss financial market supervisor declined to comment on cryptocurrency trading volumes.

The country’s Secretariat for Economic Affairs (SECO) said in an emailed statement that crypto assets are subject to the same sanctions and measures that Switzerland has imposed on “normal” Russian assets and individuals, so if a person is sanctioned, its crypto assets must also be frozen in Switzerland.

Dubai, the financial and commercial center of the Gulf and a growing crypto hub, has long attracted the world’s ultra-rich and the UAE’s refusal to take sides between Western allies and Moscow has signaled to the Russians that their money was safe there.

A real estate broker, whose company has partnered with a cryptocurrency service to help people buy property, said: “We’ve seen a lot of Russians and even Belarusians come to Dubai and bring everything they can bring, even in crypto.”

GETTING OUT OF SANCTIONS?

A financial source in the United Arab Emirates confirmed that the Russians were buying property in Dubai, using crypto as a way to get their money out of other jurisdictions and into the Gulf state.

Cryptocurrency exchanges said, while giving few details, that they were blocking the accounts of Russians sanctioned by the West for Moscow’s invasion of Ukraine, which Russia calls a “special operation”. Read more

Major exchanges such as Coinbase Global Inc (COIN.O) and Binance say they are taking steps to ensure crypto is not used as a way to evade sanctions, and are working with law enforcement on the matter.

Yet because crypto offers users a high degree of anonymity, European countries such as Germany and Estonia this week called for stricter oversight to close any loopholes that could allow sanctions to be circumvented.

Three Western diplomats said they were increasingly alarmed by the number of Russians who in recent weeks had sought sanctuary in the United Arab Emirates for their fortunes, including in real estate, and feared some could act on their behalf. of people under sanctions.

Two of the diplomats said they were skeptical of the UAE’s crackdown on Russian wealth in the Gulf state, which they said was mostly held in Dubai, citing the country’s neutral stance in the dispute .

A third said he hoped the UAE, which is also a gold trading hub, would understand the implications for its reputation and take action.

The UAE was placed on a “grey list” this month for increased scrutiny by the financial crime and money laundering watchdog group, the Financial Action Task Force (FATF). Read more

The FATF cited risks in certain industries, including real estate agents and traders in precious metals. Dubai passed a virtual assets law this week and set up a regulator. The UAE regulator said it was set to issue regulations and consulted on money laundering risks in the sector. Read more

The Dubai government media office and the UAE central bank did not immediately respond to requests for comment.

The UAE Foreign Ministry said it had no further comment beyond previous statements that the government was “firmly committed” to working with the FATF on areas for improvement in its anti-money laundering and anti-terrorist financing regime.

MARINA AND DOWNTOWN

Some experts say the relative transparency of cryptocurrency transactions, which are recorded on the blockchain ledger that underpins bitcoin and other tokens, makes it difficult to evade sanctions on a large scale.

The US Treasury said on Monday that circumventing sanctions using crypto was “not necessarily feasible” and called for vigilance from companies in the sector.

Two sources familiar with the matter said that companies in the United Arab Emirates had reputational problems about doing business with Russians, but believed that the state’s abstention from the UN Security Council , when Russia vetoed a resolution condemning its invasion of Ukraine, was a signal that they should not impose restrictions on Russians. . Read more

The United Arab Emirates, which has deepened its ties with Russia over the years, has not matched the sanctions imposed by Western countries and its central bank has issued no directives regarding the measures.

Dubai, an attractive tourist destination, has long been popular with Russians, who were among the top visitors and property buyers even before the war and subsequent sanctions threw Russia’s economy into turmoil.

Apurv Trivedi of Healy Consultants, which advises on setting up businesses, including crypto companies, said they have certainly garnered more interest from Russian clients.

“They are basically trying to hedge against the inflationary pressures that are happening against the Russian currency, so crypto has been a really good outlet for them to manage the risks they face,” Trivedi said. “It’s a good liquidity provider for them.”

Healy’s Sami Fadlallah said a lot of the money coming in from Russia goes into Dubai real estate, citing both industry talk and their company’s experience.

“People park their money in dozens of apartments in the marina, downtown,” Fadlallah said.

“We’ve seen a lot of Russians hedge their bets against ruble devaluation by moving a lot of assets into crypto. And the UAE is relatively lenient in terms of regulations and authorities on transferring crypto here.”

Reporting by Yousef Saba, Riham Alkousaa, Lisa Barrington and Alexander Cornwell; Written by Samia Nakhoul; Additional reporting by Tom Wilson in London and Brenna Hughes Neghaiwi in Zurich; Editing by David Clarke

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