A report by TRM Labs reveals that Kyrgyzstan is becoming a hub for Russian cryptocurrency activities aimed at circumventing international sanctions, largely driven by the fallout from Russia's invasion of Ukraine. Before the invasion, Kyrgyzstan's crypto industry was minimal. The report identifies that Russia-linked entities account for nearly all of the cryptocurrency transactions in Kyrgyzstan, where many platforms show ties to the now-defunct Russian exchange Garantex. The growth in Kyrgyz cryptocurrency transactions, which surged to $4.2 billion in the first half of 2024, suggests a significant reliance on Russian demand. Additionally, entities such as the Rusich Group, a paramilitary organization, are using these platforms to facilitate transactions. Although Kyrgyzstan has established a pro-crypto legal framework, experts warn that the country's weak governance and high corruption risk allow for these illicit financial activities to persist. Numerous virtual asset service providers (VASPs) are based in Kyrgyzstan, with reports highlighting potential risks in the financial system due to a lack of oversight.

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