EU Weighs Blanket Ban on Crypto Transactions With Russia to Counter Sanctions Evasion

The European Union is considering a sweeping prohibition on all cryptocurrency transactions involving Russia as part of efforts to restrict Moscow’s ability to use digital assets to bypass existing sanctions, according to a document obtained by FT. The proposed measures would specifically target efforts to prevent sanctioned Russian crypto infrastructure from re-emerging under new guises.

Officials are seeking to block "copycat Russian crypto entities spun out of already sanctioned platforms" and argue that such entities are being leveraged to support trading activity connected to Russia’s war against Ukraine, the FT reported on Tuesday. The proposed restrictions are designed to close loopholes that regulators believe have allowed sanctioned actors to continue operating through successor or affiliated digital platforms.

The proposals could also have ripple effects beyond Russia. Kyrgyzstan may face increased scrutiny under the draft measures, which include potential restrictions on the export of certain dual-use goods. The EU alleges companies in Kyrgyzstan have supplied Russia with items such as electronics used in drones and weapons, according to the FT.

Data cited in the document underscores concerns about trade flows. "Imports of common high-priority items from the EU to Kyrgyzstan have grown almost 800 percent since the war began, while exports from the country to Russia are 1,200 percent higher," the document obtained by the FT says, adding that continued trade "demonstrates a continuing and particularly high risk of circumvention."

The measures are also aimed at preventing the creation of successor exchanges to the Russian crypto platform Garantex, which the EU sanctioned last year. Policymakers have expressed concern about the emergence of new platforms acting as functional replacements for previously sanctioned exchanges.

Blockchain intelligence firm TRM Labs has said Garantex — alongside Iranian exchange Nobitex — accounted for more than 85% of inflows to sanctioned entities and jurisdictions in 2024. The United States has also taken action against Garantex, redesignating the exchange last year. The U.S. Treasury Department’s Office of Foreign Assets Control has stated that most funds sent to Garantex originated from other cryptocurrency exchanges linked to criminal activity.

The proposals remain in the early stages of the EU legislative process. Any new sanctions package would require unanimous approval from all member states. According to FT reporting, three of the bloc’s 27 countries have expressed reservations about the proposed ban, raising uncertainty about whether the measures will ultimately be adopted.

By fLEXI tEAM