A report by TRM Labs reveals that Kyrgyzstan is being utilized by Russian entities to circumvent international sanctions through its growing cryptocurrency sector. This sector, which was nearly nonexistent before the 2022 invasion of Ukraine, has rapidly expanded with Russian demand driving its growth. TRM Labs found significant connections between Kyrgyz platforms and the now-defunct Russian exchange Garantex, indicating that these platforms facilitate significant ruble-to-crypto transactions. Despite the expansion, experts note a lack of genuine local adoption and hint at the presence of shell companies among Kyrgyz crypto firms. The report identifies groups, including the paramilitary Rusich Group, using these exchanges for illicit financial activities, thus highlighting the vulnerabilities in Kyrgyzstan’s political and regulatory framework. The country’s move to recognize cryptocurrencies in 2022 has led to a surge in registered virtual asset service providers, yet concerns over governance and corruption remain high, raising questions about the sustainability of this crypto ecosystem.

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