A report by TRM Labs reveals that Kyrgyzstan's cryptocurrency industry, which was almost nonexistent before the Russian invasion of Ukraine, is now dominated by Russia-linked activities. This growth is driven by Russian demand, with Kyrgyzstan serving as a front for platforms associated with the shuttered Russian exchange Garantex. The report highlights the use of A7A5 stablecoin transfers from Garantex to Kyrgyz-based Grinex, along with similarities in registration details among various Kyrgyz exchanges, indicating potential shell company operations. Notable entities exploiting these exchanges for evasion of international sanctions include the Rusich Group. Despite Kyrgyzstan's pro-crypto legislation and a substantial increase in transaction volume, experts warn of a lack of local retail adoption and point to a political climate that facilitates illicit financial flows. With over 126 virtual asset service providers (VASPs) now licensed, Kyrgyzstan's role in the global financial network is seen as increasingly significant, raising concerns about its vulnerability to exploitation by sanctioned entities.

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