A report by TRM Labs reveals that Kyrgyzstan is being used by Russian entities to bypass international sanctions, particularly through the crypto sector. Following the Russian invasion of Ukraine in 2022, Kyrgyzstan's cryptocurrency industry has significantly expanded, with almost all activity linked to Russian platforms, notably the shuttered exchange Garantex. Analysis indicates that many Kyrgyz crypto companies have overlapping registration details typical of shell companies, confirming their role in facilitating illicit financial activity. Despite a pro-crypto law enacted in January 2022, which recognized cryptocurrencies as property and allowed for the rapid growth of virtual asset service providers (VASPs), there is minimal evidence of local demand in Kyrgyzstan, suggesting the ecosystem primarily caters to Russian users. Reports indicate connections between Kyrgyz exchanges and sanctioned Russian entities, raising concerns about transparency and the potential for corruption in Kyrgyzstan's governance. Without stronger regulations and enforcement against money laundering, Kyrgyzstan remains susceptible to exploitation by sanctioned groups.

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