A report by TRM Labs indicates that Russian entities are utilizing Kyrgyzstan's cryptocurrency industry as a means to circumvent international sanctions. Previously, the Kyrgyz crypto sector was virtually nonexistent before the invasion of Ukraine in 2022. The analysis revealed that nearly all of Kyrgyzstan's crypto activity is associated with Russia, particularly linked to the now-defunct exchange Garantex. The report highlights that many exchange platforms in Kyrgyzstan display suspiciously similar registration details, indicative of shell companies. Pro-crypto legislation passed in Kyrgyzstan in early 2022 coincided with increased Russian demand, allowing the crypto sector to expand dramatically. This growth has turned Kyrgyzstan into a hub for Russian entities attempting to access global finance. The report notes that while local adoption of crypto remains limited, the volume of transactions has surged significantly, raising concerns about money laundering risks in a governance structure marked by weak accountability and oversight. TRM Labs also flagged specific Russian entities using these platforms to facilitate illegal transactions including military procurements, stressing the need for enhanced regulatory scrutiny to prevent exploitation.

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