As Russia prepares to establish a regulatory framework for its crypto sector later this year, the European Union (EU) is proactively pursuing strict sanctions aimed at halting all digital asset transactions that involve the country. This move is part of a broader strategy to combat the circumvention of existing sanctions.
EU Aims for Comprehensive Sanctions on Crypto Transactions
According to recent reports, the European Commission (EC) is assessing measures that would prohibit any cryptocurrency transactions connected to Russia. A recent article highlighted that the Commission’s latest proposal favors an extensive ban rather than focusing on restricting specific Russian crypto entities that have emerged from already sanctioned platforms.
Internal documents reviewed indicate that the Commission believes a blanket prohibition is necessary to ensure that sanctions effectively achieve their intended objectives. The proposed regulations would prevent any engagement with cryptocurrency service providers based in Russia and prohibit the use of platforms that facilitate crypto transfers or exchanges established there.
This approach aims to counter the establishment of new platforms designed to sidestep previous sanctions. Notably, the proposed sanctions specifically target successors to notorious crypto exchange Garantex, which was sanctioned by the U.S. government in 2022 for facilitating the operations of cybercriminals.
The EC’s proposal also aims to scrutinize A7, a payment platform reportedly designed to enable cross-border transactions despite sanctions imposed after Russia’s invasion of Ukraine. The A7A5 stablecoin, linked to ruble transactions and previously utilized by Garantex for fund transfers to Kyrgyz exchange Grinex, is also under the Commission’s scrutiny.
Despite the imposition of restrictive measures from the EU, UK, and US, reports reveal that the stablecoin has maintained a significant transaction volume, reportedly reaching $100 billion.
Furthermore, the Commission is considering adding 20 banks to its sanctioned entity list and imposing restrictions on any transactions involving a digital ruble. It has also proposed a ban on the export of dual-use goods to Kyrgyzstan, citing concerns over local companies supplying restricted items to Russia.
However, implementing these measures will require unanimous support from EU member states, and there are indications that three countries within the bloc have expressed skepticism regarding the proposal, according to discussions among diplomats.
The Evolution of Russia’s Digital Asset Landscape
This potential crackdown comes at a pivotal moment for Russia as it moves forward with its own digital assets regulatory framework. Recently, the Central Bank of Russia (CBR) unveiled comprehensive proposals aimed at allowing both retail and institutional investors to acquire digital assets through licensed platforms.
Additionally, the Russian State Duma has been working on advancing legislation that would regulate the seizure of crypto assets within criminal proceedings. This move aims to mitigate risks associated with the use of digital currencies in unlawful activities such as money laundering and corruption.
Amid these developments, Sberbank, Russia’s largest bank by assets, has announced plans to offer crypto-backed loans to corporate clients, reflecting a growing interest in digital assets among Russian businesses. The bank is eager to collaborate with the CBR in crafting regulatory measures and is currently finalizing the necessary infrastructure to support this emerging financial service.
