A report by TRM Labs reveals that Kyrgyzstan's cryptocurrency sector is largely comprised of Russian activities, predominantly due to sanctions imposed following the Ukraine invasion. The analysis indicates that Kyrgyz platforms are being used as fronts for services linked to the Russian exchange Garantex, which was closed down by international enforcement in March. Not only have transactions increased dramatically since 2022, but many firms exhibit characteristics typical of shell companies, operating with shared contact information and addresses. Despite this growth being driven by Russian demand, there’s little indication of local adoption in Kyrgyzstan. The report connects various Russian entities, including sanctioned groups like Rusich, with Kyrgyz exchanges, suggesting a significant role for Kyrgyzstan in facilitating Russia's access to global finance under sanctions. The fact that over 126 virtual asset service providers (VASPs) are now registered in the country highlights the ongoing expansion of this sector, exacerbated by weak regulatory oversight and governance issues. This environment poses high risks for illicit financial flows, underscoring the need for stronger measures against such abuses in Kyrgyzstan's crypto landscape.

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