A report from TRM Labs reveals that Kyrgyzstan is becoming a significant hub for Russian entities to bypass international sanctions via cryptocurrency. Almost all of Kyrgyzstan's crypto industry is linked to Russia, which had minimal crypto activity prior to the Ukraine invasion in 2022. The report highlights the connection between Kyrgyz platforms and the Russian exchange Garantex, which was shut down in March. Experts note that the lack of local demand in Kyrgyzstan emphasizes Russian exploitation of its political environment. The increase in crypto transactions in Kyrgyzstan, reportedly driven by Russian demands, reflects a growing trend of sanctioned individuals and groups using these exchanges, including links to organizations like the Rusich Group. Despite a pro-crypto law enacted in early 2022 that helped spur industry growth, transparency issues and a weak political framework make Kyrgyzstan a vulnerable point for illicit financial flows. The country now has over 126 licensed virtual asset service providers, and plans for a stablecoin suggest that this trend may continue unabated unless stronger safeguards are implemented.

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