A report by TRM Labs reveals that Russian entities are utilizing Kyrgyzstan's cryptocurrency sector to bypass international sanctions. This industry in Kyrgyzstan, which was largely nonexistent before the 2022 invasion of Ukraine, now accounts for nearly all crypto-related activity in the country. The report suggests that many Kyrgyz platforms are associated with Russian exchange Garantex, which was shut down due to international pressure. As of 2022, Kyrgyzstan's government had adopted pro-crypto regulations, leading to a rapid expansion in the sector driven by Russian demand. Yet, experts note that there is minimal local adoption of cryptocurrencies. The report highlights that Kyrgyz exchanges facilitate significant transactions using Russian-backed stablecoins, thus acting as conduits for Russian entities seeking access to global financial systems despite sanctions. Additionally, the lack of governance and weak regulations in Kyrgyzstan exposes the country to further exploitation for illicit financial activities. The political climate, marked by low transparency, underscores the risks involved in this burgeoning industry.

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