Crypto Exchange Kraken Will Use Russian Trading Fees For Up To $10 Million In Donations To Ukraine Customers

Kraken CEO Jesse Powell has taken to Twitter multiple times in recent weeks to push back against requests from the Ukrainian government and public pressure from the likes of Hillary Clinton to block Russian users. His crypto exchange, like competitors such as Coinbase and Binance, continues to operate in the country while firms like Apple Visa, Mastercard, PayPal, McDonald’s, and others are leaving.

It is all part of his effort to thread the needle between operating in a highly regulated industry without compromising on the ethos of crypto.

Kraken’s latest attempt at striking this balance is a $10 million package for Ukraine, which the company is calling its first major international aid distribution, which is largely tied to keeping its Russian market open.

The program will begin by providing $1,000 worth of bitcoin on March 10th to all Ukrainian clients that created an account prior to March 9 that have an intermediate or pro account. The bitcoin will be free to withdraw or convert to another asset and the company will cover any associated fees. Subsequent tranches will be distributed throughout the year as well as other unannounced efforts.

However, the controversial part of this plan deals with how these dividends are financed. While Kraken has the funds to pay for this aid program outright, it was recently valued at $20 billion and is rumored to be planning an IPO this year, the aid will be at least partly driven by the trading volume of Kraken’s Russian clients. “As part of the effort, Kraken will also donate an amount equivalent to the total trading fees paid by Russia-based clients in the first half of 2022 to the aid package.”

Skeptics could argue that by tying the amount, or speed of aid, to Russian trading activity he is limiting the impact of the program.

How much the company may still need to provide from its own balance sheet is also to be determined. The company does not disclose a user breakdown by country, and would not share numbers on the number of users it has in Russia or Ukraine. If at the end of June 2022 Russian traders only generated $1 million worth of trading fees, Kraken could find itself needing to make up the shortfall. The only difference is that some of this aid would likely come weeks or months later.

It is also unclear what would happen if U.S. regulators force Kraken to blacklist Russia before the end of June.

It is worth noting that Powell first major crypto CEO to publicly respond to a plea from Ukrainian minister of digital transformation Mykhailo Federov to ban Russian traders, saying in a thread on Twitter on February 27th that while he has deep respect for the Ukrainian people it was contrary to the purpose of crypto to independently take this step.

He also expressed deep reservations about weaponizing crypto, suggesting that some users might be surprised at who would be cut off from the platform if the threshold was engaging in military conflict across the world.

“If we were going to voluntarily freeze financial accounts of residents of countries unjustly attacking and provoking violence around the world, step 1 would be to freeze all US accounts. As a practical matter, that’s not really a viable business option for us.” –
Kraken CEO Jesse Powell

He regularly implores Kraken clients to take their assets off of the exchange if they are not looking to trade the assets. When he made a similar pronouncement during the Ottawa trucker protests, to whom he donated funds, as the Canadian government was trying to crack down on crypto donations, he was criticized by the Ontario Securities Commissioner for ostensibly giving advice to clients about ways to protect their assets.

This announcement comes on the heels of Binance, the largest exchange in the world pledging on February 27th to donated at least $10 million through its dedicated charity arm to major intergovernmental organizations and nonprofit organizations already on the ground, including UNICEF, UNHCR, the UN Refugee Agency. It has raised an additional $11 million through a sponsored crowdfunding initiative. FTX, a Bahamian-based competitor provided $25 to each Ukrainian user. Just today, CEO Sam Bankman-Fried, the second-richest person in the industry with a $20+ billion fortune, announced a personal partnership with the Ukrainian Ministry of Finance to raise crypto donations.