UK Tightens Sanctions, Targets Crypto Used for Russian Sanctions Evasion

The United Kingdom has imposed sanctions on a Kyrgyzstan-based bank and a cryptocurrency exchange accused of facilitating sanctions evasion for Russia using the ruble-backed stablecoin A7A5.

Key Highlights:

• Targeted Entities: Capital Bank (Kyrgyzstan) and crypto exchange Grinex have been sanctioned.
• The Stablecoin: A7A5, issued by Old Vector, is designed to provide an alternative to USDT and assist in recovering assets frozen on the sanctioned exchange Garantex.
• Sanctions Minister Statement: Stephen Doughty emphasized the UK's commitment to preventing Russia from using crypto to soften the impact of sanctions.
• A7A5's Role: Crypto forensics firms like TRM Labs and Elliptic have linked A7A5 to sanctions evasion, alleging it helps funnel money to Russia's war efforts.
• Garantex Connection: A7A5 allegedly allows former Garantex customers to trade or redeem balances frozen after the exchange's domain seizure.
• Massive Transfers: Elliptic reported over $1 billion in daily transfers through A7A5 in late June, with aggregate transfers exceeding $41 billion.

Sanctioned Entities and A7A5's Function

The UK specifically sanctioned Capital Bank and Grinex, which TRM Labs identifies as a successor platform to Garantex. Meer, a crypto exchange launched the same day as Grinex and A7A5, was also sanctioned.

A7A5 is promoted as a fully regulated token offering security and an alternative to USDT, reducing the potential impacts of sanctions. However, it is used on various exchanges, including sanctioned platforms like Bitpapa, as well as Uniswap and Curve.

A7A5: A Closer Look

A7A5 offers a yield of 50% on interest earned from backing bank deposits. Elliptic reports that the A7A5 team has stated that the coin offers “an alternative to USDT that is not subject to sanctions risks.”

Crypto's Role in Sanctions Evasion

This action highlights growing concerns about the use of cryptocurrency to circumvent international sanctions, particularly those imposed on Russia. The UK and US are actively monitoring and targeting entities involved in such activities.