Financial institutions

Mastercard and Visa block Russian financial institutions after new sanctions

Mastercard and Visa have pledged $2 million for humanitarian aid to Ukraine. Photo: Maxim Zmeyev/Reuters

Mastercard (MA) and Visa (V) blocked several financial institutions in Russia from using their payment networks after the West imposed tougher sanctions on the country.

On Monday evening, Mastercard said it would continue to work with regulators in the coming days, although it did not specify which companies were restricted.

“We will continue to work with regulators in the days ahead to fully meet our compliance obligations as they evolve,” the company said.

The New York-based company has also pledged $2m (£1.5m) for humanitarian aid to Ukraine.

Visa also made a similar donation and said its number one priority was “to ensure the safety and security of our colleagues who are directly affected.”

In a brief statement, he said, “The Visa Foundation will provide a $2 million grant to the US Fund for UNICEF to support humanitarian assistance to the people of Ukraine.

Read more: How Economic Sanctions Work

“We are proud to support UNICEF’s courageous work and humanitarian relief efforts. Visa will also match all employee donations (up to $1 million) to UNICEF and Red Cross Ukraine Response Funds.

“Beyond these efforts, Visa is taking prompt action to ensure compliance with applicable sanctions and stands ready to comply with any additional sanctions that may be implemented.”

Government sanctions are forcing Visa to suspend access to its network for entities listed as specially designated nationals, Reuters reported, citing a source familiar with the matter.

The United States added various Russian financial firms to the list, including the country’s central bank and second-largest lender VTB.

It comes as Russia continues to grapple with the financial fallout from the sanctions. The ruble crashed to a record high against the dollar on Monday, plunging 30% to 120 to the dollar, as authorities feared a run on banks.

The Russian central bank more than doubled its key rate to 20% and also announced a series of other measures to stem the decline.

Meanwhile, the UK, US, Europe and Canada have also recently blocked some Russian lenders from accessing the SWIFT international payment system.

Read more: What the Ukrainian invasion means for UK consumer prices

Recent sanctions have caused a surge in cryptocurrencies, especially in Russia and Ukraine.

Bitcoin (BTC-USD) trading in Russian ruble picked up momentum when the invasion began last Thursday with daily volumes increasing by around 260% from the previous day to reach 1.3 billion. rubles (£9.2m, $13.5m), according to data from CryptoCompare.

“The direct implication of the Russian sanctions has been a spike in the prices of cryptocurrencies, and in particular bitcoin,” said Ipek Ozkardeskaya, principal analyst at Swissquote.

“The coin, which was moving with risk assets less than two days ago, is now the asset that Russians and Ukrainians rely on to get their funds out of the traditional system that has become very hostile to them.

“Being able to transact valuable bitcoin also helps Russian oligarchs circumvent Western sanctions. It can also help Russian companies and even the Russian central bank to move funds as these entities can no longer access US dollars and most Russian banks are no longer part of the SWIFT system.

Watch: Swift Sanctions: How the Bank Shutdown Puts Pressure on Russia