Inca Digital: Huobi and KuCoin, both based in Seychelles, still let traders transact with debit cards issued by sanctioned Russian banks on their P2P platforms
Huobi & KuCoin — failed to take steps to prevent sanctioned Russian banks from using their platforms, according to a report from blockchain analytics firm Inca Digital provided to POLITICO. W/ @samjsutton https://www.politico.com/...
Context & Ripple Effects
Blockchain analytics firm Inca Digital handed Politico a map of a sanctions leak: Huobi and KuCoin, both domiciled in Seychelles, still process transactions with debit cards issued by Russian banks under Western sanctions on their P2P platforms — no blocking step taken at all. The finding lands on exchanges with a documented history of jurisdictional arbitrage, including blocking mainland China numbers for new registrations while later steering Chinese users toward Dominican digital citizenship to evade domestic trading rules.
The report also fits a broader pattern the corpus keeps surfacing: despite public retreats, Russia-linked crypto flows persist, as when an investigation found Binance still handling substantial ruble trading via intermediaries after scaling back in Russia in 2023. For KuCoin specifically, compliance failure has a measurable price tag — U.S. authorities extracted roughly $300 million in fines and forfeitures over its unlicensed money-transmitting operation.
First-order effects
- Huobi and KuCoin now face direct evidence-based exposure to OFAC-style enforcement, since processing sanctioned-bank cards is exactly the conduct that produced KuCoin's approximately $300 million settlement.
- Inca Digital's role hardens: its analytics output is functioning as the primary detection mechanism regulators use against offshore venues.
Second-order effects
- Competitors get pulled into the same audit cycle — the Binance ruble-trading findings show that 'scaling back in Russia' claims invite deeper forensic scrutiny of intermediary flows.
- Seychelles-style domiciles lose their insulation value as Western agencies demonstrate they will pursue entities wherever incorporated, raising compliance costs across every exchange serving Russian-adjacent users.
Third-order effects
- Sanctions enforcement is shifting toward a private-public model where blockchain analytics firms effectively set the surveillance agenda and exchanges must either build real screening or exit jurisdictions entirely — the Bitpapa/Exmo ecosystem suggests a bifurcation into compliant venues and dedicated evasion channels.
The trend: Offshore-domiciled crypto exchanges are being forced to choose between genuine sanctions screening and ceding the Russian flow business to purpose-built evasion platforms.