Russian-linked crypto activity surges 7018% in Kyrgyzstan amid sanctions evasion and Ukraine war funding

Russian entities are leveraging Kyrgyzstan’s rapidly expanding cryptocurrency sector to circumvent international sanctions and fund military operations in Ukraine, according to a report by TRM Labs. Following the implementation of Kyrgyzstan’s “On Virtual Assets” law in January 2022, the country’s crypto ecosystem has grown dramatically, with virtual asset service provider (VASP) licenses rising to 126 by October 2024. Transaction volumes surged from $59 million in 2022 to $4.2 billion in the first seven months of 2024. However, TRM Labs highlights that this growth has enabled illicit activity, as Kyrgyz-registered exchanges are being used as shell entities linked to sanctioned Russian groups, including the Rusich paramilitary organization [1].

The report identifies parallels between these exchanges and the now-banned Russian platform Garantex. After Garantex’s takedown in March 2025, new Kyrgyz-registered platforms such as Grinex and Meer emerged with similar transaction patterns. Grinex, for instance, began facilitating withdrawals using a Russian stablecoin, A7A5, shortly after the Garantex disruption, with its registration tied to the A7A5 issuer, Old Vector, suggesting coordinated activity [1]. TRM Labs warns that Kyrgyzstan’s current regulatory framework—allowing remote registration of VASPs by foreign nationals—facilitates abuse by shell companies and foreign actors. The firm advocates for stricter oversight, including transparency rules and physical residency requirements for operators.

Bilateral economic ties between Russia and Kyrgyzstan have intensified, with Russian investment in the country rising 23% in early 2024. Trade between the two nations reached $3.5 billion in the previous year, while Chinese exports of dual-use goods to Kyrgyzstan and Kazakhstan increased by 64% from 2022 to 2023, totaling $1.3 billion [1]. Analysts note that Kyrgyzstan has become a critical transshipment point for these goods, which could be repurposed for military use. The surge in crypto activity also aligns with broader Russian efforts to diversify financial channels. Last month, the Russian Agricultural Bank (RusAg) announced plans to explore crypto-based payments for grain exports, citing cryptocurrencies as a “convenient alternative instrument” amid sanctions restrictions. Separately, the Bank of Russia recently permitted limited access to crypto-linked financial products for qualified investors, allowing non-deliverable derivatives tied to cryptocurrency prices [1].

The findings underscore growing risks of sanctions evasion through decentralized financial systems. Kyrgyzstan’s regulatory environment, while promoting crypto innovation, lacks mechanisms to prevent exploitation by sanctioned entities. TRM Labs emphasizes the need for international collaboration to address vulnerabilities in cross-border crypto networks. As Russian financial institutions increasingly turn to digital assets for trade and investment, the role of emerging markets like Kyrgyzstan in facilitating these flows will remain a focal point for policymakers and global compliance efforts.

Source: [1] [Russia Uses Kyrgyz Crypto Hub to Evade Sanctions and Fund Ukraine War: TRM Labs] [https://cryptonews.com/news/russia-uses-kyrgyz-crypto-hub-to-evade-sanctions-and-fund-ukraine-war-trm-labs/]