Dubai-based OTC Crypto Exchange Attracts Sanctioned Traders: Report

Coinsfera, the Dubai-based over-the-counter (OTC) crypto exchange, is proving popular among traders sanctioned by the West, according to Bloomberg.

Bloomberg reported Monday that Coinsfera is becoming the top exchange for Russians, Iranians and others under Western sanctions or separate local restrictions.

In a statement after this article was published, a spokesperson told Blockworks Bloomberg’s claims were “offensive and defaming” to the company. Coinsfera follows so-called know-your-customer and anti-money laundering regulations in the region, as well as the US and elsewhere, the spokesperson said.

“We do not transact with any sanctioned companies, individuals, countries, or any entity including, citizens of Iran and any other sanctioned countries,” the spokesperson said.

The exchange’s clients are primarily those who struggle to transact via banks due to limitations on their access, bankers, lawyers and crypto executives told Bloomberg. 

Sanctioned Russians have flown to Dubai to carry out sizable OTC transactions, three sources told the news publication.

OTC desks — like the one Coinsfera operates — allow traders to exchange sizable amounts of digital assets away from public markets. Whales usually opt for OTC platforms if they want to make large plays without impacting crypto prices, which, depending on the asset, can be illiquid and thus market-moving when it comes to larger trades.

Unlike centralized exchanges, which match trades digitally, OTC trades are regularly executed by swapping offline crypto storage solutions. This structure allows Coinfera users to buy crypto assets locally, then sell for instant cash in Dubai. 

Practically all major exchanges, including Binance, Coinbase and Kraken, operate OTC desks, although generally users must pass compliance screening, which excludes individuals sanctioned by the US and other major jurisdictions.

Coinsfera, set up in Dubai in 2015, describes itself as a cryptocurrency “cashpoint” through which users can buy and sell over 500 cryptocurrencies within 10 to 15 minutes.

“Customers that use Coinsfera’s crypto exchange procedures are not constrained by trade restrictions,” the company wrote in an earlier statement. “Any quantity of money may be obtained with ease, at the lowest possible cost, and in the shortest period feasible. Users may easily sell or buy bitcoin in Dubai with a valid ID from any nation.”

Local entrepreneur Karin Veri told the outlet she visits Coinsfera monthly as an “an easy way to get cash out in just a few minutes.” 

Dubai wants to be a global crypto hub

Both Binance and Kraken have come under scrutiny for allegedly violating US sanctions by allowing users in Iran access to its services. After the US withdrew from the Iran nuclear accord in 2018, most businesses with US presences were banned from continuing trade in the Middle Eastern country. 

The companies have denied violating sanctions.

Binance and Coinbase have moved to block certain Russian users after the US, UK and the European Union imposed sanctions over its war with Ukraine. 

But the United Arab Emirates, home to glitzy Dubai, has chosen not to impose sanctions on Russia. That means Coinsfera — which also has offices in London, Istanbul and Pristina — and other OTC exchanges are not forbidden to conduct such business by the emirate.

Even so, the US has called on financial institutions in the UAE to be “exceedingly cautious” in handling Russia-related business. 

Bloomberg said the amount of money Coinsfera is moving isn’t clear, because trades are cash-settled and not reported publicly. The spokesperson said the company conducts a full screening of users and follows procedures aimed at combating illicit transactions. The exchange additionally uses blockchain-tracking firm Chainalysis to combat users trying to circumvent sanctions, the representative said.

Dubai has emerged as a hub for crypto asset trading, partly because of its friendly taxation policy and attractive regulations that have drawn entrepreneurs from around the world. Data shows a third of UAE residents are crypto investors. 

Binance boss Changpeng Zhao recently moved from Singapore to Dubai, while exchanges including FTX and Binance have recently been granted provisional virtual asset licenses there.

This article was updated at 6:18 p.m., ET, August 2, to include statements from a Coinsfera spokesperson provided after this story was originally published.

---

Start your day with top crypto insights from David Canellis and Katherine Ross. Subscribe to the Empire newsletter.