A report from TRM Labs reveals that Kyrgyzstan's cryptocurrency sector is largely composed of activities linked to Russia, primarily serving as a conduit for evading international sanctions. This crypto market, which was almost non-existent before Russia's invasion of Ukraine, has grown rapidly, driven mainly by Russian demand rather than local usage. Many platforms in Kyrgyzstan are found to be linked to Garantex, a Russian exchange that was shut down due to international pressure. Moreover, operations such as large-scale ruble-to-crypto transactions via Russian-backed stablecoins are commonplace. Experts attribute this growth to the favorable political environment in Kyrgyzstan, characterized by weak governance and potential exploitation for illicit financial flows. With over 126 virtual asset service providers already licensed in Kyrgyzstan and the introduction of a USD-pegged stablecoin in development, concerns are escalating regarding the country’s role in facilitating Russian access to global financial systems amid ongoing sanctions.

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