Russia turns to Kyrgyzstan’s booming crypto sector to evade sanctions, researchers say

Russia is increasingly exploiting Kyrgyzstan’s fast-growing cryptocurrency sector to bypass international sanctions and funnel money for its war in Ukraine, researchers have found.

According to a new report by blockchain intelligence firm TRM Labs, Kyrgyz-registered exchanges have repeatedly been used by sanctioned Russian entities. Many of these virtual asset service providers (VASPs) appear to operate as shell companies, often reusing the same residential addresses, contact details and founders across multiple entities.

Several of the Kyrgyz-registered VASPs identified in the report had no visible business operations or public-facing user platforms. Some shared phone numbers with logistics companies, while others listed founders with no prior business or cryptocurrency experience. 

Some of these entities were also found to share wallet infrastructure and behavioral patterns with Garantex, a high-risk Russian crypto exchange that was sanctioned by the U.S. and taken offline in 2022. Researchers said some of the Kyrgyz-registered firms may be operated by the same individuals behind the original platform.

Since Russia’s full-scale invasion of Ukraine in 2022, the Kremlin has increasingly relied on alternative financial networks to fund its war effort and procure sensitive technology. Kyrgyzstan has become a popular logistics and financial hub for Moscow. Goods such as semiconductors, drone parts and anti-UAV equipment — often considered dual-use — have reportedly been rerouted to Russia via Kyrgyzstan after being exported from countries like China.

Kyrgyzstan’s crypto-friendly laws have further enabled this activity. A 2022 law recognized virtual assets as legally protected and established a licensing regime for crypto businesses, placing them under formal regulatory supervision.

The Kyrgyz crypto loophole is part of a broader Russian effort to rewire its economy to withstand Western sanctions. The Kremlin is also institutionalizing sanctions evasion at home. Moscow’s prestigious Higher School of Economics recently launched a master’s program to train students in navigating Western trade and financial restrictions — a sign that the Russian government sees long-term value in developing a sanctions-resilient economy.

Western nations have increasingly scrutinized Russia’s expanding sanctions evasion infrastructure. In June, U.S. authorities charged a Russian citizen living in New York with using his crypto firm to move sensitive American technology and funds on behalf of sanctioned Russian banks.

“Governments and law enforcement agencies seeking to counter Russia’s sanctions evasion toolkit need to urgently engage directly with Kyrgyz authorities on compliance,” TRM Labs researchers said. “If left unchecked, Russia could replicate these same playbooks in neighboring jurisdictions.”