Imagine traveling abroad and waking up one day to find your debit card has turned into a useless piece of plastic.
This nightmare came true for most if not all of the hundreds of thousands of Russians who fled their country after President Vladimir Putin started a war in Ukraine and introduced a kind of soft martial law at home.
Soon after the Feb. 24 invasion, Visa and Mastercard stopped processing payments for cards issued in Russia. Many Russians abroad found themselves suddenly unbanked. Around that time, the ruble plummeted and Russians at home rushed to banks and ATMs in a panic. Soon, withdrawal limits were introduced.
“When I heard the cards won’t work anymore I went to an ATM and checked it out – yes, it didn’t.” said Artem Loskutov, a modern artist who went on vacation to Thailand before the war and decided not to come back for a while. “I asked my girlfriend in Moscow to take out some dollars in cash from an ATM, but that was the moment when they stopped cash withdrawals from the foreign currency accounts.”
These Russians have been using crypto as a last resort at the same time as Ukraine has raised over $100 million in crypto donations to fund weapons and supplies for the army, humanitarian aid, evacuation and other things people desperately need during the war.
This article is part of CoinDesk’s Payments Week series.
Many Russians condemned the war that has caused the destruction of entire cities and thousands of civilian casualties in Ukraine. Some of those Russians decided to leave the country to avoid being penalized for their anti-war stance. Although recent estimates show a significant part of the population supports the invasion, for those who disagree, Russia swiftly passed a law effectively criminalizing any critique of the armed forces, with up to 15 years in prison as punishment.
Journalists, political activists, artists and others flew out of Russia, landing mostly in countries that allow Russians to enter without a visa, including Turkey and the former Soviet republics of Georgia and Armenia. Their flight was made much harder as global payment systems, such as Visa, Mastercard, Western Union, Wise, Remitly and MoneyGram, stopped working with Russia and Russia, in turn, limited the amount of foreign currency one can take abroad to $10,000 per person.
OTC brokers and P2P platforms
Stuck with no access to his bank account in Thailand and scrambling to get a local one, Loskutov started asking his friends what could be done.
He found an over-the-counter (OTC) broker. OTC refers to businesses that trade directly with customers rather than through an exchange. The broker agreed to help Loskutov get Thai baht in exchange for the dollars stuck in his Russian account – using USDT, a cryptocurrency whose value is tied to the U.S. dollar, as a bridge. The scheme was elaborate and simple at the same time.
The friendly broker showed Loskutov how the Binance exchange’s peer-to-peer (p2p) platforms work. Although the exchange recently stopped accepting Russia-issued bank cards, on its p2p platform, you still can find offerings to buy and sell crypto using accounts at some Russian banks. So the broker found someone who was ready to sell USDT for a transfer to his account at the same bank as Loskutov used.
Then the broker asked Loskutov to send the payment to the seller, while the seller transferred USDT to the broker’s own account. After that, the broker sold the USDT on the same p2p marketplace by Binance, received Thai baht at his Thai bank account and then transferred them to an account of Loskutov’s friend, as he himself hadn’t yet set up a local bank account of his own. Loskutov ended up paying 7% to 10% in fees on those transactions.
As he kept exploring crypto options, Loskutov realized the p2p market in Thailand was flourishing. The popular channel for currency exchange is a local chat on the Telegram messaging app, where Russian-speaking expats seek counterparties to swap rubles for dollars, baht for USDT and so on in different combinations.
In any case, crypto remains a “working option” for him, Loskutov said. “Our Motherland has failed us, and so did the West – well, what can you do? We need to survive.”
Russian expat communities and crypto payments
In other countries, too, Russian expat communities have been growing, as have specialized chat groups for p2p deals. In those chats, ordinary people look for counterparties and intermediaries like Loskutov’s p2p facilitator who are willing to offer fast deals for a fee.
In Montenegro, a small European nation on the Adriatic coast, the local Telegram group for crypto and fiat currency exchange counts a little more than 3,000 users from Ukraine, Russia and other Russian-speaking countries who are looking to swap their rubles or hryvnias for euros, euros for USDT and vice versa.
“Montenegro is a small country, so in two hours, you can get basically everywhere and meet in person,” says a Russian journalist who relocated there long before the war. He asked not to be named for safety reasons, because some of his family remain in Russia. For this story, we will call him Oleg.
“Here, everybody knows each other, so if someone screws you over, you can easily find them,” Oleg said. “In this small world, it’s quite hard to swindle each other.”
The journalist left Russia when he felt the authorities’ attention to his work was growing increasingly hostile.
“At some point, I felt that my every day is overshadowed by this anxiety, and it’s just impossible to live like that; you start degrading.”
Montenegro is one of the no-visa countries where Russians can easily enter and legally stay for long periods of time, and the costs of living are low, compared with the rest of Europe. Ukrainian refugees have moved there, too, as they escaped the war via the southwestern border of Ukraine, going west through Romania, Hungary and then the Balkans.
Ukrainians could have been the reason the fees recently went down for p2p trades and liquidity grew, Oleg said, because Ukrainian citizens, unlike Russians, still can use their bank cards abroad, as well as global remittance services.
“My hypothesis is that Ukrainians can cash out their money much easier, so now, Russians turned to Ukrainians” to exchange money in Montenegro, he said.
‘Worse than a bank’: A Russian’s emotional letter to Binance
Oleg started paying attention to crypto after he left Russia last year, and has tried a bunch of things since then. To get his money out of his Russian bank account, he decided to use crypto so that Russian authorities couldn’t track his funds in the global banking system. So he bought some ether with funds from the bank accounts.
Then, he swapped ether for USDT and invested all the money in futures contracts. Futures trading seemed exciting at first, and Oleg even made some money, he said. That, however, was “neophyte's luck.” Last September, the market went down, and Oleg lost all of his investment.
Then, another chance came: His wife got paid for her work in crypto. Oleg did some research and found out that very few crypto exchanges allowed withdrawals to Montenegro bank accounts (which Oleg at that point managed to get), and those that did allow withdrawals didn’t look reliable to him, he said. So he used the p2p way and swapped his crypto for cash with a stranger at a local cafe.
Now, Oleg is trying to relocate his mother to Montenegro, too, and get her savings out of Russia using Binance, he said. His mother was on board with the plan, but because she is an elderly lady with little IT experience, Oleg is doing everything himself. At one point, Binance froze the account, requiring additional verification.
“That was worse than a bank!” Oleg said of the experience.
He had only a few days between Visa and Mastercard announcing they wouldn’t work with Russian cards anymore and the moment Binance stopped accepting such cards. Oleg got his mom an account on Binance, his sister back home helped take her picture, and then Oleg started buying USDT. After that, Binance noticed “suspicious activity” with the account, possibly triggered by the inconsistency of Oleg’s IP address and his mom’s actual location. The account was frozen.
As he was waiting for his appeal to be processed, Oleg wrote an emotional letter to Binance.
“I said, ‘Look, these are my lifetime savings, and if you don’t speed this up, my Russian bank card will stop working and all my savings will go to fund Russian bombs and tanks. So that will be your fault, and I will end up with no money,’” he recalled.
Soon after that, the account was unfrozen, Oleg said, and his parents’ savings ended up on a Binance account in USDT. But then, Binance banned the account from withdrawing funds, demanding additional detailed verification. At the moment, Oleg is working on getting this resolved and getting his mom out of Russia.
Despite the quirks of the crypto world, Oleg said he is glad this channel exists.
“If there was no crypto, our losses and sufferings would be much bigger. When your government goes berserk, it’s good to have this little argument you can put against it,” he said.
Crypto as a backup option
For some Russian emigrés, cryptocurrency proved to be not the main money-moving tool, but rather a clumsy and expensive back-up option in case nothing else worked.
Another expat, whom we’ll call Alexander, works at a startup helping people invest in in-game items (like skins, virtual weapons, etc.) as if they were stocks. He asked that his last name and employer’s name not be published. The company did invest in NFT (non-fungible token) projects, Alexander said, but he hadn’t really used crypto for his personal needs until the war started and he left Moscow for Batumi, Georgia.
Alexander spent most of his life in Moscow, but his family came out of Georgia and his grandparents live there. When the war started, it wasn’t clear whether Russia was going to close its borders, Alexander said. He hadn’t seen his grandparents for a long time because of the global COVID-19 pandemic and travel restrictions. And so he decided there was no better time to visit his historic Motherland.
Alexander flew to Georgia in March and is now planning to establish his residence there. But although his company operates in virtual reality, it is legally based in Russia, and so his income accumulates in an account in a Russian bank.
Alexander used Binance’s p2p platform to buy USDT, but then it turned out he couldn’t withdraw Georgian lari to a local debit card because Binance didn't support Georgian cards, he said. So he withdrew USDT to another exchange, in this case CEX.io, where Alexander sold USDT for a lari transfer to his relative’s bank account.
However, this method, at the end, felt too costly and clunky for Alexander to use regularly, he said. Now, he’s looking into more traditional, fiat remittance options that still work for Russian citizens. For example, KoronaPay, a Cyprus-registered fintech company, allows users to send money between Russia and multiple other countries, including some in the European Union, similar to what Western Union does.
In Georgia, it’s possible to receive cash via KoronaPay at the offices of local banks for a small fee, Alexander said. The only downside is that banks, apparently, have daily withdrawal limits for KoronaPay customers, and so one day, Alexander walked into a bank branch just to hear there was no cash for him left, he said. The next day, everything worked.
Another option Alexander is considering now is Bankoff, a service that issues virtual debit cards that cannot be topped-up via Russian bank accounts, but can be with USDT. Alexander heard about Bankoff in Georgia and tried it out for a small payment, he said.
Now, crypto seems a good option for transferring large amounts, while for smaller transfers, other arrangements look better, Alexander said.
“I keep around 80% of my savings in crypto. It gives me peace of mind and a sense of freedom from any sanctions,” said Tim, a digital security consultant for a Russian nonprofit, who relocated to Asia in December. He too asked that his family name not be published.
Tim got his first crypto in January, when he convinced his employer to send his paycheck in bitcoin, and then he converted it to USDT.
“I had an income from outside of Russia and I wanted to keep it outside of Russia in order not to pay taxes funding Putin’s regime – which funded another war, it turned out – and also not to get a status of a foreign agent,” Tim says. He was referring to the recent practice in Russia to label independent journalists and political activists as foreign agents if they receive any funds from abroad. This became a method of pressure on those who made the ruling regime unhappy.
At first, Tim wasn’t planning to emigrate. In December, he went to Europe for a training trip with a Russian nongovernmental organization he’s working for – he asked that it not be named. Then, he traveled some more and ended up in Asia. Then the war started.
Speaking to CoinDesk, Tim admitted that he’s still arguing with himself whether he should return to Russia and advocate for stopping the war from inside.
“I’m staying, and I feel shame for this. But here, I can still work and be helpful, and there, I will just end up in jail,” he said.
Because Russian debit cards stopped working abroad, Tim’s main source of cash for living has been his crypto savings. And here, again, the gray market is king.
“There are Telegram channels where OTC desks advertise, I tell them the amount and my location, they connect me to someone working in that area. I meet them in their car, send them USDT and get local currency in response,” Tim said.
According to Tim, people are using centralized exchanges in the country he’s in, and bank accounts have recently become available for foreigners, too. The local currency, however, is “falling faster than the Russian ruble,” and Tim doesn’t want to lose money on exchange rates.
“I’m using stablecoins because I haven’t done enough research to find the best cryptocurrency for me yet. Next step is to invest in various cryptos in order to diversify my bag,” he said.
Binance declined to comment for this story.
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