Russian billions of dollars in crypto flows in the UAE dodging sanctions

Crypto firms in the UAE are being flooded with requests to liquidate billions of dollars of virtual currency as Russians seek a safe haven for their fortunes, Reuters reported. According to sources, some clients are investing with crypto in real estate in the UAE, while others want to use local companies to turn their virtual money into fiat currency and stash it elsewhere.

One crypto firm has received lots of queries in the past 10 days from Swiss brokers asking to liquidate billions of dollars of Bitcoin because their clients are afraid Switzerland will freeze their assets, one executive said, adding that none of the requests had been for less than $2 billion.

“We’ve had like five or six in the past two weeks. None of them have come off yet – they’ve sort of fallen over at the last minute, which is not rare – but we’ve never had this much interest,” the executive said, adding that his firm normally receives an inquiry for a large transaction once a month.

“We have one guy – I don’t know who he is, but he came through a broker – and they’re like, ‘we want to sell 125,000 Bitcoin.’ And I’m like, ‘what? That’s $6 billion guys.’ And they’re like, ‘yeah, we’re going to send it to a company in Australia’,” the executive said.

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

One real estate broker, whose company has partnered with a cryptocurrency service to help people buy property, said: “We’ve been seeing a lot of Russians and even Belarusians coming to Dubai and bringing whatever they can bring, even in crypto.”

A financial source in the UAE told Reuters that Russians were buying property in Dubai, using crypto as a way of getting their money out of other jurisdictions and into the Gulf state.

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

Major exchanges such as Coinbase and Binance say they are taking steps to ensure that crypto is not used as a vehicle to evade sanctions and that they collaborate with law enforcement on the issue.

Still, as crypto offers users a high degree of anonymity, European countries such as Germany and Estonia have this week called for tighter oversight to snuff out any loopholes that could allow sanctions busting.

The UAE was put on a “grey list” this month for increased monitoring by financial crime and money laundering watchdog the Financial Action Task Force (FATF).

The FATF cited risks in certain industries, including real estate agents and precious metals dealers. Dubai adopted a virtual assets law this week and established a regulator. The UAE’s regulator said it was close to issuing regulations and has consulted on money laundering risks in the sector.

Meanwhile, the UAE’s Foreign Ministry told Reuters that the government has a “strong commitment” to working with FATF on areas for improvement in its anti-money laundering and counter-terrorism financing regime.

Two sources familiar with the matter said UAE companies had reputational concerns about doing business with Russians. However, the UAE, which has deepened ties with Russia over the years, has not matched sanctions imposed by Western nations and its central bank has not issued any guidance regarding the measures.

Dubai, an attractive tourism destination, has long been popular with Russians, who were among the top visitors and purchasers of real estate even before the war and ensuing sanctions threw the Russian economy into turmoil.

Apurv Trivedi of Healy Consultants, which advises on setting up businesses, including crypto companies, said they had definitely been getting more interest from Russian clients.

“They’re basically trying to protect themselves against the inflationary pressures that are happening against the Russian currency. So crypto has been a very good exit for them to manage the risks that they’re facing,” Trivedi said. “It’s a good liquidity provider for them.”

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

“People parking their money in dozens of apartments in the Marina, Downtown,” Fadlallah said. “We’ve seen a lot of Russians hedging their bets against the devaluation of the rouble by moving a lot of assets into crypto. And the UAE is relatively loose in terms of its regulation and authorities over transferring crypto here.”

Buying property in the UAE is comparatively frictionless and offers investors a residency visa, without needing local sponsorship, DW noted. Paperwork to buy an apartment or start a business is minimal and cash is king, investigators have found.

Investing in real estate worth around $272,000 gets the buyer a three-year UAE visa. Investing about $1.36 million buys a five-year visa. Ordinary, upper-middle-class Russians, looking to avoid their business being appropriated by their own government or the economic meltdown back home, might well have the funds to set up a safe haven here too.