Crypto: FTX president details how the exchange is handling sanctions, Russia-Ukraine war

FTX US President Brett Harrison joins Yahoo Finance Live to discuss cryptocurrencies' involvement in the Russia-Ukraine war, how the exchange is complying with sanctions against Russia, and the price of bitcoin.

Video Transcript

AKIKO FUJITA: Let's turn our attention to crypto now, with Bitcoin hovering just below that $40,000 price handle. Investors are continuing to eye the impact of the Russian war in Ukraine on crypto markets, with the largest exchanges continuing to feel the pressure to ban Russian users.

Let's bring in FTX US President Brett Harrison. And Brett, I'm going to get to some of those questions a lot of exchanges like yourself have faced in terms of how crypto can be used to evade sanctions, whether they can. But I'm just curious to what extent you have seen trading volumes go up since this all began. Have you actually seen a boost on your platform?

BRETT HARRISON: We are seeing boosts on the platform because any fairly significant moves in crypto results in larger trading volumes. For example, on FTX, most of the volume comes from institutional players that are market making. So it doesn't matter whether the prices are going up or down. The more volatility in the market, the more that they are providing liquidity into that market. And so with all of the violent swings in global market prices, in equity indexes, in futures, and oil prices, as you guys just discussed, but also in crypto prices, we're always going to see an increased liquidity and volume in the market, generally from institutional players.

So we are seeing that in crypto on our platform. And especially, we're seeing, for example, increases in crypto volume from Ukrainian citizens who are looking to use crypto to help find a safe haven for some of their assets in this very terrible time for them.

JARED BLIKRE: And Brett, can you tell us about some of the compliance tools that you have that already exist to make sure that you aren't, in fact using-- that some of your clients aren't using Bitcoin for nefarious purposes or that they're not on some watch list? I'm just wondering how that fits in with the decision by your company and some of your competitors to not proactively ban all Russian customers right now, absent some kind of decree which hasn't come down yet.

BRETT HARRISON: Sure. Yeah, it's a great question. There's a lot of discussion right now in the media about to what extent are cryptocurrencies complying with US sanctions. So FTX US is a FinCEN-regulated business, which means we are required to comply with anti-money laundering and sanctions that are required by a bank sanctions list, for example. And we have a huge array of tools that allow us to comply with those sanctions.

So for example, when we ever take a client in for the first time, we take a number of different pieces of identifying information that help us cross-check against various government lists of bank-sanctioned lists, FBI Most Wanted lists, Interpol consolidated sanctions lists, that help us ensure that we are not servicing sanctioned individuals for nefarious purposes on the platform.

On top of that, we also use fairly advanced dynamic blockchain risk and analytic tools, for example TRM Labs and Chainalysis, which are able to heuristically tag wallets and addresses with information such as the geographic location of those addresses, whether they've been connected to any known criminals or hackers in the past. And we can proactively ban and block transfers in and out of the platform from that.

So I would say the cryptocurrency exchanges are some of the most effective organizations in the world at being able to, using digital technology, prevent sanctioned activity from happening on the platform.

AKIKO FUJITA: Brett, I know your platform, along with competitors like Binance, have so far resisted this idea of kicking Russian users broadly off of the platform. And that's a question that so many companies are dealing with. A lot of other tech companies who've said, look, we're no longer doing the services in Russia. I mean, that's average Russians getting affected as a result of that as well.

What's the conversation within the company right now about moving forward with that? Or is that a line that you just don't see yourself crossing at all?

BRETT HARRISON: Yeah, excellent question. So for such a large public policy impact decision such as deciding to ban all Russian users, for example, it's important that a private company like FTX not make this decision on our own. We are in direct dialogue with the Treasury to make sure that we are following their guidance on what they would like us to do, again, in the best interest of public policy.

So as sanctions continue to roll out and increase, we are following those hand-in-hand. So if, for example, Russian institutions like banks, to block those, we're very careful to make sure that we block incoming deposits from large Russian institutions. As people get added to the sanctions list, we make sure to block them.

But to make a decision on our own to, for example, ban all citizens of one country or another is something that we want to hear from the government directly if it's something they want to do. And so far, they have not said that's something that they're asking us to do. If they did tomorrow, we would do this tomorrow. So we're just in constant dialogue with the government, with regulators, with law enforcement on exactly what's the best course of action for us to take.

JARED BLIKRE: And Brett, I wanted to get your view of crypto prices, specifically Bitcoin, which had a huge two-day rally last week. That's fizzled out. Looks like almost all of it has been negated or returned. And I'm just wondering, have you noticed differences in flows?

You've said that most of the volumes you see on your exchange come from institutional traders. Is there anything that gives you an indication that this was kind of an-- I don't know-- aberration from history, that move that we saw last week? Is this all about Russia-Ukraine? Or is there something more going on in the crypto flows that you're seeing now?

BRETT HARRISON: It's hard to know exactly what's making such a large impact, such as the moves we saw in the last couple of days. I think what is clear is that people are starting to see, in real time play out, the value of a decentralized currency, especially in the direction towards supporting Ukraine.

So we're now seeing upwards of more than $50 million worth of crypto assets being donated either directly to the Ukrainian government through various efforts or to humanitarian aid organizations on the ground using crypto. And to see the entire global crypto economy get to participate in providing assistance to Ukraine in real time using this borderless, decentralized currency that settles in real time is showing some of the promise of cryptocurrency that has been promised for the whole time that cryptocurrency has been a technology available to us.

So this is a great way to do global remittances. It's a great way to be able to do instant cross-border payments. And we think that was partly behind some of the interest in cryptocurrency and the rise in prices over the last couple of days.