Experts assessed what the exchange can do and shared their experience in dealing with blocking

“No Logic.” Why Roskomnadzor blocked OKX, and who's next

06.10.2022

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5 min

Access to the site of cryptocurrency exchange OKX was blocked by Roskomadzor (the Federal Service for Supervision of Communications, Information Technology and Mass Media) on October 3 at the request of the Prosecutor General's Office. The exact reason for the exchange site to be included in the banned list remains unknown, and market representatives allow for the possibility of new cases of this kind, referring to past experience.

The press service of the regulator explained the blockage by the fact that the exchange site posted “information related to the activities of Ponzi schemes and information about the provision of financial services by unauthorized persons,”but no specific details were given and a copy of the prosecutor's decision is not publicly available. The exchange's domain is listed in the register of banned sites and access to the site from Russian IP addresses is restricted.

OKX ranks third among crypto exchanges by trading volumes, its services are used by many users from Russia, and the site did not impose sanctions or restrictions on their accounts. At the time of publication, representatives of the trading platform did not make statements about the blocking. In response to questions from users in the Russian-language channels of OKX on Telegram and Discord, moderators confirmed that the exchange continues to serve customers from Russia while referring to public information from the exchange website and not commenting on the blocking by the Roskomnadzor.

Blocking the sites of both Russian and international cryptocurrency projects has been occurring sporadically for several years, and each case is solved individually by representatives of the services. As a rule, it is possible to get the decision of the supervisory authorities reversed. It is likely that exchange representatives will also enter into a dialogue with Roskomnadzor representatives, not wanting to lose a significant part of the user base.

How blocking goes

“In our experience, it is extremely rare for prosecutors to act solely on their own initiative,” explains Bestchange.ru senior analyst Nikita Zuborev. Bestchange is a popular online exchange aggregator whose site has been blocked by Roskomnadzor three times for various reasons. Each time the owners of the service successfully succeeded in getting the regulators' decision reversed. The analyst said that according to the type and content of claims to block sites related to cryptocurrencies, it can be concluded that they are divided into two types: “by quotas” and “by applications.”

The first ones took place mostly “in the times of a complete legal vacuum” when the sites of cryptocurrency exchangers were blocked en masse by decisions of the prosecutor's office regarding the most popular exchange directions (for example, buying bitcoin with a Sberbank card). Now such package blocking is much less common, but still not completely excluded, Zuborev notes.

The second type is associated with applications from citizens. In this scenario, a person who has fallen victim to intruders goes to the police. In the application, he or she may mention a site, and this, despite the context, may lead to a decision to block it. “Unfortunately, most prosecutors do not objectively have the necessary IT expertise, so they initiate the blocking of all the sites listed in such cases without assessing their degree of guilt and involvement in the crime. They tried to block our site for selling counterfeit banknotes on this principle, although it's hard to imagine a chain of actions that would lead to such a conclusion,” shares the Bestchange analyst.

What the blocked ones do

The first case of mass blocking of cryptocurrency project sites in Russia took place in January 2015. At that time, access to the international website bitcoin.org was blocked by a court order for posting information about “money surrogates,” as well as to the pages of popular media about cryptocurrencies Coinspot and Bitsmedia (then Btcsec). The news about the blockages resonated significantly in both Russian-language and international media, and by the end of the same year, the owners of the blocked resources managed to get the regulators' decision reversed and return access to the sites to Russian users via court.

Sporadic blockings of crypto websites by Roskomnadzor took place from time to time, and representatives of Russian services, involving lawyers, in most cases successfully succeeded in getting bans lifted for their resources, or moved the sites to new domain zones and addresses, which then remained unblocked. As a rule, it is more difficult for foreign services to interact with Russian regulators, and mainly large services with local offices and a significant number of Russian users sought to have their bans lifted.

In September 2020, Roskomnadzor blocked access to the Binance exchange website. The reason for the blocking, according to the press service of the supervisory authority, was the "distribution of information about the possibility of acquiring electronic cryptocurrency Bitcoin". The exchange lifted the ban through the court, but at that time there were other blocking procedures, explains Managing Partner of GMT Legal Andrey Tugarin. On July 14, amendments went into effect that give the Prosecutor General's Office the right to suspend the activities of Internet resources without a court order.

“I can't say that this creates a precedent that will apply to other exchanges. I can assume that the OKX site mistakenly released a publication with an ambiguous meaning, which the General Prosecutor's Office considered contrary to Russian law,” the lawyer commented. According to him, it is possible to challenge the decision by presenting necessary evidence and removing the information that confused the prosecutors.

Irrespective of the location of the business, projects interested in the Russian market challenge court decisions, Zuborev notes. As a rule, cases to get blockages lifted are won in courts at the regional level or higher. According to the analyst at Bestchange.ru, it is extremely rare that a prosecutor can provide serious grounds for blocking. Most often, these are formal and vague formulations, which are quite easy to challenge due to the fact that there were no grounds for legal blocking as such.

According to Zuborev, the problem is that such cases are heard in remote district courts without the involvement of defendants, and judges, who are also not competent enough to independently assess the technical aspects of the case, usually trust the arguments of prosecutors and make positive decisions. The affected services usually learn about such cases from the Roskomnadzor, when they receive a notice about the blocking of the site from the hosting provider or from the media.

Should we expect more blockages?

When asked if it is possible to predict the future blocking of crypto services by the Roskomnadzor, Zuborev is sure to give a negative answer. “There is no logic or regularity in blocking. They can block absolutely any service, at any time and for any reason,” the analyst explains.

According to him, most of these cases can be challenged because they will not have sufficient legal grounds, but this will require time (usually several months) and lawyers. “All that time, the site is likely to be listed on the blocked registry. The site owner will not be informed in time, the order to block will already be issued to Roskomnadzor, and the case will be long in line for appeal,” adds Zuborev.

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