A report by TRM Labs reveals that Kyrgyzstan is being exploited by Russian entities to bypass international sanctions through cryptocurrency operations. The study highlights that the crypto industry in Kyrgyzstan, which was nearly nonexistent before Russia's invasion of Ukraine in February 2022, is now dominated by Russia-linked activities. Kyrgyz platforms like Grinex are suspected to be rebranded Russian exchanges that facilitate significant ruble-to-crypto transactions, primarily using Russian-backed stablecoins. The surge in Kyrgyz crypto activity is attributed to Russian demand rather than local usage, raising concerns about its illicit financial flows. TRM Labs notes that many Kyrgyz exchanges share similar residential addresses, indicating potential shell companies aiming to obscure the origins of funds. Furthermore, the permissive political environment in Kyrgyzstan, coupled with weak regulatory oversight, increases vulnerability to exploitation by corrupt actors. With over 126 Virtual Asset Service Providers (VASPs) now licensed, the report emphasizes the urgent need for enhanced transparency and stronger safeguards against money laundering.

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