As Russia moves to regulate the crypto sector later this year, the European Union (EU) is considering implementing strict sanctions on all digital asset transactions linked to the country to curb sanctions evasion.
EU Seeks Sanctions On Russian Crypto Transactions
On Tuesday, the Financial Times (FT) reported that the European Commission (EC) is evaluating measures to prohibit all crypto transactions with Russia, stepping up its efforts to crack down on the country’s use of digital assets to evade sanctions.
According to documents reviewed by the FT, the Commission has seemingly proposed a broader prohibition “instead of attempting to ban copycat Russian crypto entities spun out of already sanctioned platforms.”
“In order to ensure that sanctions achieve their intended effect [the EU] prohibits to engage with any crypto asset service provider, or to make use of any platform allowing the transfer and exchange of crypto assets that is established in Russia,” explained the internal document outlining the proposed sanctions.
The Commission argued that “any further listing of individual crypto asset service providers … is therefore likely to result in the set-up of new ones to circumvent those listings.”
Notably, the proposal reportedly focuses on preventing the growth of successors to the Russia-linked crypto exchange Garantex. In 2022, the US sanctioned the platform for “operating as the exchange of choice for cybercriminals”.
Moreover, the document is aimed at the payments platform A7, a company reportedly conceived as a mechanism to facilitate cross-border trades due to sanctions imposed after Russia invaded Ukraine, and its connected ruble-pegged stablecoin A7A5, previously used by Garantex to transfer funds to Kyrgyz exchange Grinex.
As reported by Bitcoinist, the EU, UK, and US have adopted restrictive measures against the payment platform. Despite this, recent reports revealed the stablecoin has an aggregate transaction volume of $100 billion.
In addition, the EC suggested adding 20 banks to the list of sanctioned entities and a ban on any digital ruble-related transactions. The Commission also proposed a ban on the export of certain dual-use goods to Kyrgyzstan, claiming that local companies have sold prohibited goods to Russia.
Nonetheless, imposing the measures would require the unanimous support of member states, and three of the bloc’s countries have reportedly expressed doubts, three diplomats briefed on discussions told the FT.
Russia’s Digital Assets Landscape
The potential crackdown comes as Russia continues to develop its upcoming digital assets framework. The CBR recently unveiled its comprehensive regulatory proposals to enable retail and qualified investors to buy digital assets through licensed platforms in the country.
Last month, the Committee on State Building and Legislation at the State Duma also advanced a bill to regulate the seizure of crypto assets in criminal proceedings and reduce the risks associated with the use of digital assets in criminal activities, including money laundering, corruption, and terrorist financing.
Meanwhile, Russia’s largest bank by assets, Sberbank, recently announced that it is preparing to offer crypto-backed loans to corporate clients following strong corporate interest.
The bank affirmed its readiness to work with the Central Bank of Russia (CBR) to develop regulations, and it is finalizing the necessary infrastructure and procedures for potential scaling of crypto-backed lending.
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