A new report from TRM Labs reveals that Kyrgyzstan's cryptocurrency ecosystem is being utilized by Russian entities to bypass international sanctions, with this activity comprising almost the entirety of the country's crypto industry. Prior to Russia's invasion of Ukraine in 2022, Kyrgyzstan's crypto industry was virtually nonexistent. The rapid growth of the sector since then has been driven primarily by demand from Russia, rather than local use. Many platforms registered in Kyrgyzstan share common addresses and contact details, resembling shell companies. The report highlights that Kyrgyz exchanges, like Grinex, are closely linked to the sanctioned Russian exchange Garantex, facilitating considerable ruble-to-crypto transactions. Additionally, Kyrgyzstan is seen as a critical hub for Russian groups, including paramilitary outfits, to access global financial systems. While the country passed a pro-crypto law in January 2022, establishing a registration regime for virtual service providers, significant concerns about governance and corruption hinder effective oversight, exposing the system to exploitation by corrupt actors and sanctioned entities.

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