A report by TRM Labs indicates that Kyrgyzstan's crypto industry, which was nearly nonexistent before Russia's invasion of Ukraine in 2022, is now heavily influenced by Russian operations, particularly linked to the now-shuttered Garantex exchange. This growth has turned Kyrgyzstan into a conduit for Russian entities seeking to evade international sanctions by utilizing its cryptocurrency platforms for illicit financial transactions. Many Kyrgyz exchanges show similarities in registration details and practices typical of shell companies. The analysis highlights that despite a legislative push in Kyrgyzstan recognizing cryptocurrencies, the demand largely stems from Russian clients rather than local adoption. There are significant concerns that the political environment in Kyrgyzstan, characterized by weak governance and corruption, could facilitate further exploitation by sanctioned Russian actors. Additionally, Russian groups have been reportedly using these exchanges for various illicit activities, raising alarms about the potential risks posed by Kyrgyzstan’s expanding crypto sector.

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