A report by TRM Labs reveals that Kyrgyzstan's cryptocurrency sector is largely driven by Russian entities seeking to evade sanctions. Shortly after the invasion of Ukraine in 2022, Kyrgyzstan's crypto industry, largely unidentified prior to that, expanded significantly, driven mostly by Russian demand. The research highlights that many Kyrgyz platforms exhibit behaviors typical of shell companies, and that Russian activity comprises almost all of Kyrgyzstan's crypto dealings. The report connects Kyrgyz platforms with Russia's shuttered Garantex exchange, accused of facilitating illicit financial flows. TRM Labs notes that several Kyrgyz exchanges have been used for large-scale transactions with Russian-backed stablecoins. Furthermore, the study indicates that Kyrgyz exchanges are becoming conduits for both legitimate and illicit Russian financial activities, including potential military procurement efforts. Transparency International expresses concerns about Kyrgyzstan's weak governance, which enables exploitation by sanctioned entities and corrupt actors.

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