A new report by UK-based TRM Labs reveals that Kyrgyzstan's cryptocurrency industry, which was nearly absent before the 2022 Ukrainian invasion, is now dominated by Russian-linked activity. The report indicates that Kyrgyzstan serves as a front for crypto platforms, especially the rebranded Garantex, a Russian exchange shut down due to sanctions. Investigations show many Kyrgyz platforms share similar addresses and details, suggesting they operate as shell companies. The report highlights that Kyrgyz crypto platforms facilitate significant ruble-to-crypto transactions, mainly through Russian-backed stablecoins like A7A5. Despite this growth, local demand appears minimal, with operations driven predominantly by Russian interests. Kyrgyzstan’s lax regulations and political vulnerabilities present risks for illicit financial activities, further compounded by the country’s ongoing expansion of the crypto sector, including developing a USD-pegged stablecoin. Transparency issues and weak governance raise concerns about exploitation by sanctioned Russian entities, exacerbating the need for stronger anti-money laundering measures.

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