A report from TRM Labs reveals that Russian-linked entities dominate Kyrgyzstan's nascent cryptocurrency industry, which emerged after Russia's invasion of Ukraine in 2022. TRM Labs found that many Kyrgyz crypto platforms are tied to Garantex, a Russian exchange shut down earlier this year. Kyrgyzstan implements a pro-crypto legal framework that has led to rapid growth, with transaction volumes rising dramatically; however, this growth is predominantly driven by Russian demand with minimal local adoption. The report highlights significant links between Kyrgyz exchanges and Garantex, exhibiting common addresses and ownership, indicating potential shell company operations. Furthermore, Russian groups, including sanctioned entities, have been using these platforms for large-scale transactions, often using Russian stablecoins. Transparency concerns arise given Kyrgyzstan’s political climate, characterized by weak governance, leaving it vulnerable to exploitation for illicit financial flows. Experts are warning of the risks posed by such practices without stronger regulatory frameworks in place.

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