- Trending
- Comments
- Latest
The Kyrgyz crypto hub is facing global scrutiny after a bombshell report from TRM Labs alleged that Russia is exploiting the country’s booming digital asset sector to bypass sanctions and fuel its war in Ukraine.
Just three years after Kyrgyzstan passed its landmark “On Virtual Assets” law in January 2022, the nation has evolved into a magnet for crypto businesses.
But according to blockchain intelligence firm TRM Labs, that rapid growth has also opened the floodgates for illicit activity—particularly from sanctioned Russian entities.
The Kyrgyz crypto hub has flourished under a regulatory framework that appeared progressive on paper.
With 126 licenses granted to virtual asset service providers (VASPs) by October 2024, the country saw its crypto transaction volume explode from just $59 million in 2022 to $4.2 billion in the first seven months of 2024.
However, TRM Labs’ latest findings reveal a darker side to this meteoric rise.
“Many of these Kyrgyz-registered platforms are effectively shell companies that mirror the operational model of banned Russian exchanges,” said Ari Redbord, Global Head of Policy at TRM Labs.
TRM identified exchanges in Kyrgyzstan that recycled addresses, contact information, and even founders—strong indicators of coordinated efforts to obscure origins and ownership.
Several of these entities were allegedly involved in transactions with Russia’s Rusich paramilitary group, closely tied to the notorious Wagner Group.
The report draws parallels between Kyrgyz platforms like Grinex and Meer, and the now-sanctioned Russian exchange Garantex, which was shut down by law enforcement in March 2025.
Within weeks of that takedown, Grinex emerged and began enabling crypto withdrawals via A7A5—a Russian stablecoin issued by Old Vector, another newly registered Kyrgyz entity.
The synchronicity suggests a deliberate continuation of Garantex’s operations, now housed within the Kyrgyz crypto hub.
“It’s clear these are not isolated actors,” said Redbord. “They are part of a broader strategy by Russian networks to keep their digital finance lifeline open, and Kyrgyzstan has become a crucial enabler.”
The transformation of the Kyrgyz crypto hub into a digital finance hotspot coincides with a steep rise in Russian economic activity in the region.
Moscow’s investments in Kyrgyzstan surged by 23% in early 2024, while bilateral trade hit $3.5 billion in 2023.
Even more concerning, Kyrgyzstan—along with Kazakhstan—has reportedly become a transit route for dual-use goods.
Chinese exports of these materials, which can be used in both civilian and military applications, rose 64% year-over-year to $1.3 billion by 2023.
Kyrgyz law currently allows foreign nationals to remotely register VASPs without any physical presence.
According to TRM Labs, this loophole must be closed immediately to prevent abuse of the Kyrgyz crypto hub by foreign shell companies.
“Without transparency and local accountability, the sector is wide open to manipulation,” said Yaya Fanusie, Director of Policy for Anti-Money Laundering at the Crypto Council for Innovation.
The firm has urged the Kyrgyz government to enforce in-person registration requirements, implement better KYC protocols, and increase scrutiny of license applicants.
Meanwhile, Russia appears to be doubling down on digital assets as a workaround for sanctions. The Russian Agricultural Bank recently confirmed it’s working with the Bank of Russia to test crypto-based payment systems for grain exports.
Irina Zhachkina, First Deputy CEO of RusAg, remarked,
“Digital assets represent a convenient and resilient alternative for cross-border trade under today’s financial constraints.”
In June 2025, the Russian central bank also greenlit limited exposure to crypto-linked financial products—though only in the form of non-deliverable derivatives settled in fiat.
While the Kyrgyz crypto hub has undoubtedly spurred innovation and attracted investment, its role in global financial crime is drawing unwanted attention.
Copyright © 2025 - The Bit Gazette.
