Russia bypasses sanctions via fast -growing Kyrgyz crypto sector

Russian entities use the Crypto Ecosystem of Kyrgyzstan en masse to avoid international sanctions. This is apparent from a new report from the British blockchain-inlaying agency TRM Labs. The investigation reveals that Kyrgyzstan acts as a hiding place for crypto platforms that have close ties with the now closed Russian stock exchange Garantex.

According to TRM Labs, there are significant money flows between Russian parties and platforms registered in Kyrgyzstan. This is often used by the Stablecoin A7A5 supported by Russia, which was used to transfer money from Garrantex to the Kyrgyison Exchange Grinex. Many of these fairs would show characteristics of empty companies, such as identical founders and contact details.

Explosive growth Kyrgyz Crypto-Industry by Russian demand

For the Russian invasion of Ukraine in February 2022, the crypto sector in Kyrgyzstan was virtually non -existent. The situation changed after the introduction of a pro-Cryptowet in January 2022, with which crypto currency were officially recognized and a registration system for providers of virtual assets (VASPs) was introduced.

Thanks to this law and the increasing demand from Russia, the trade volume raised. Where VASPs traded only $ 59 million at the end of 2022, this rose to 4.2 billion dollars in the first seven months from 2024. According to Isabella Chase, head of policy at TRM Labs, this growth is completely driven by Russian users. “The Kyrgyz crypto sector is in fact an extension of the Russian market,” said Chase.

Cryptoplatforms facilitate illegal money flows and military purchases

TRM Labs states that various Kyrgyison platforms, including Grinex and more, make large -scale transactions possible from rubles to crypto currency. According to the report, these stock markets have become essential channels for Russian actors – both legitimate and illegal – who, despite sanctions, are looking for access to international financial systems.

In addition, TRM Labs discovered that the paramilitary organization Rusich Group has registered wallet addresses at the Kyrgyz Exchange Envoys Vision Digital Exchange (EVDE). EVDE and other platforms maintain close ties with logistics companies and Chinese financial institutions. This points to involvement in the purchase of goods for two -tane use, such as semiconductors and drones, which are ultimately used in Russia.

Kyrgyzstan important link in trade with Russia and China

The economic interdependence between Kyrgyzstan and Russia is growing rapidly. In 2024, bilateral trade was 3.5 billion dollars. In addition, the export of strategic Chinese goods to Kyrgyzstan and Kazakhstan increased by 64% between 2022 and 2023 to a value of 1.3 billion dollars. Many of these goods are taken to Russia, despite international sanctions.

These figures show that Kyrgyzstan, together with other countries in the region, plays a crucial role in circumventing trade restrictions. As a result, the country is becoming increasingly important in the network that offers Russian entities access to prohibited goods and financial services.

Political vulnerability and high corruption risk

Although Kyrgyzstan now has more than 126 licensed crypto companies and is working on the development of its own Stablecoin (USDKG), experts warn of considerable risks. The rapid growth of the sector is not supported by robust legislation or effective control mechanisms.

According to Altynai Myrzabekova, adviser at Transparency International, the country is characterized by weak institutions and an increasing concentration of power. “This creates vulnerabilities that can be misused for illegal money flows,” she says. In 2024, Kyrgyzstan only scored 25 out of 100 points on the Corruption Perceptions Index, which evokes serious concerns about the integrity of the public sector.

Prospects: growth despite risks

Without stronger law enforcement, transparency measures and political will, according to Myrzabekova, Kyrgyzstan remains very susceptible to abuse by corrupt actors and sanctioned parties. Yet the growth of the crypto sector does not seem to stop for the time being, especially due to the lasting demand from Russia.

The TRM Labs report makes it clear that the small Kyrgyzstan has grown into one in a short time Important link in the worldwide attempts of Russia to bypass sanctions.