Ukrainian Government Puts Binance Payment Service Integration on Hold

Ukraine has paused its planned integration of Binance's crypto payment service into the government's official app after backlash by the embattled nation’s crypto community.

That integration is now on hold to “clarify a few moments” first, according to a government minister.

The outrage was prompted by the government’s plans to integrate the service from the world’s largest exchange by volume at a time when Binance continues to do business with Russia, which invaded Ukraine in February. The nation's crypto exchanges don't want a foreign company to provide a service they can do as well. They showed their displeasure by blocking trades of Binance's BNB token on their platforms.

Binance had integrated its know-your-customer (KYC) process into Ukraine's Diia mobile app in late October, local crypto news media Forklog reported. Diia allows Ukrainians to make digital copies of their state-issued documents and government services online.

The article included no official comment from the Ministry of Digital Transformation, the government body responsible for the IT development of Ukraine that spearheaded the development and adoption of Diia.

Using the Binance system would allow Ukrainians to register on the crypto exchange faster by using their Diia profile, said Kyrylo Khomyakov, Binance’s general manager in Ukraine, to Forklog.

Alex Bornyakov, deputy minister of digital transformation, told CoinDesk the integration could, in principle, go further and include crypto payments in Diia via Binance.

“Diia already has some functionality for payments, and building in a crypto on-ramp is generally a good idea,” he said. But not for now.

Bornyakov added that Ukraine’s government can only use services that only services that satisfy the requirements of the law, which is currently only being developed. “After those criteria are ready, they will be published and everyone interested will be able to apply for potential integrations,” he said.

A Binance spokesperson said in a written statement to CoinDesk that "it’s early to discuss the initiative."

Binance “suggested our expertise and technology for integrating blockchain into the government services when the government is ready and choses preferred areas for that,” said the spokesperson.

Public protest

One of those "moments" that need clarification might be the immediate negative feedback from the local crypto community. Exchanges Kuna, WhiteBit and crypto lending service Trustee Plus filed a petition to Ukraine President Volodymyr Zelensky asking him to block the move. They also froze trading of BNB, Binance’s token, on their platforms.

“All the attention now is on Binance, and local exchanges are upset,” said a Ukrainian crypto entrepreneur who asked not to be named.

The head of Trustee Plus, Vadym Hrusha, told CoinDesk that it’s simply wrong to integrate a government service with a foreign company. Ukraine has its own local crypto exchanges and payment services, “with a product no worse than Binance,” he said, referring to Kuna and WhiteBit, both of which have their own payment services.

While Kuna, WhiteBit and Trustee are all officially registered outside Ukraine, the founders and teams are Ukrainian, and all three used to be based in the country before relocating after the invasion of Ukraine.

“It’s not patriotic and not safe for the government,” Hrusha said. “Plus, Binance is a Chinese company, and China is not Ukraine’s friend. We don’t know what data they are sending and to whom. Any moment, we (Ukrainians) can get banned.”

Binance does not advertise itself as a Chinese company, and the exchange's founder and CEO, Changeng Zhao, while born in China, grew up in Canada. He has long insisted that Binance is not a Chinese firm.

Sanctions issue

Hrusha said that Binance “does not have a straightforward position on Ukraine” because the exchange did not exclude Russian users, as some European and U.S. exchanges did after the latest round of European Union sanctions against Russia. Zhao has said that Binance’s EU entities won’t serve Russians, but other company branches don’t necessarily have to expel Russian users.

This stance did not satisfy the Ukrainian crypto community. Michael Chobanyan, CEO of Kuna exchange, told CoinDesk the community effectively blocked the integration project. Chobanyan also wants Binance to remove trading pairs with the Russian ruble, which, he believes, helps Russians evade sanctions.

Since Russia invaded Ukraine in February and started a full-scale war, relations between the two countries’ crypto communities have deteriorated. For Chobanyan the final straw was this fall’s Blockchain Life conference in Moscow, which went ahead as scheduled despite Russia’s assault on its neighbor.

“There is a war in my country, houses are ruined, all my childhood memories destroyed, and at the same time they are doing a conference, talking about how great everything is,” Chobanyan said. He added after being against crypto sanctions at first, he has now become more radical.

“Either you work in Russia, or you work in the civilized world,” he said.

A Ukrainian crypto entrepreneur, who asked not to be quoted by name, told CoinDesk that Ukrainian startups are reaching out to him and asking to remove support for Binance Smart Chain, in protest against Binance.

He admitted he would be glad if Binance would remove Russian ruble trading pairs to inflict additional pressure on Russians and encourage them to do something about their political regime waging war in Ukraine.

UPDATE (Nov. 30, 2022, 17:45 UTC): Adds another comment from Ukraine's Ministry of Digital Transformation.