Crypto and Western Sanctions
The West curbed Russian crypto transactions not by stopping flows directly, but by targeting the on- and off-ramps around the world where crypto is converted into and out of recognised fiat currencies such as the euro. This was possible because most crypto runs on public blockchains, where every transaction is permanently recorded and visible — letting analytics firms trace the flow of funds and identify the exchanges acting as choke points, even when the people behind the wallets may attempt to remain anonymous.
A case in point: the Russian rouble-pegged stablecoin ‘A7A5’ processed more than $100 billion within a year of launch, before Western action against its main off-ramps — the Estonia-registered Garantex, seized by US authorities in 2025, and its Kyrgyzstan-based successor Grinex — cut daily volumes by about two-thirds.
The EU’s 20th sanctions package, adopted in April 2026, means EU-licensed crypto exchanges risk sanctions if they accept transactions with Russian providers. This makes the new law the first direct test of Western sanctions against a state-regulated and licensed crypto system. Switzerland, though not an EU member, moved to align itself with this approach — partially implementing the 20th EU sanctions package domestically.
Three months later, as the EU was adopting its 21st sanctions package amid chaotic negotiations that exposed cracks in the European front against Russia, EU High Representative Kaja Kallas insisted the strategy was working, saying: “We are hitting Putin where it hurts most: cutting off the financial lifelines he relies on to sustain his war.”
The New Legislation vs. the Sanctions Regime
Once a Russian exporter can legally cash out crypto through a domestic exchange, the rouble side of a trade becomes untouchable to Western enforcement; there is no offshore registration to revoke or foreign domain to seize.
An example: suppose a Chinese refinery wants to buy Russian oil. It converts yuan into crypto on an on-ramp inside China — untouchable by the West. It then transfers that crypto to the Russian oil exporter.
The Russian exporter can now convert this crypto into roubles inside Russia, through the country’s newly licensed domestic exchange — equally untouchable. This closes the specific vulnerability that undid off-ramp networks like Garantex and Grinex.
The lingering threat is secondary sanctions: the tool behind the EU’s 20th sanctions package. Here, the West, reminiscent of a character out of The Sopranos, leans on smaller players — such as a bank or exchange in Mumbai, Hong Kong, São Paulo, or even Zürich — that help settle Russian payments, threatening them with sanctions in an attempt to scare them away from associating with Russia.
The West’s leverage is continued access to the euro and the dollar systems.
Not everyone is convinced this ‘sanctions’ regime is as watertight as politicians in Brussels want to believe.
Even months before Putin’s law, when the EU was still finalising its 20th sanctions package against Russian crypto activity, Lex Fisun, co-founder and CEO of the blockchain analytics firm Global Ledger, raised an eyebrow:
At this stage, distinguishing these funds from legitimate market activity becomes a technical impossibility … For European exchanges to enforce such a ban, they would essentially have to block all flows from major global trading hubs, a move that would paralyze the legitimate crypto market.
The warning looks prescient.
The EU’s 21st package, adopted 23 July 2026, allows Brussels to ban an entire country’s crypto sector if just one single platform inside the country is found to be associated with Russian sanctions avoidance.
Russia’s Crypto Law in Context
Russia’s new law places Moscow among a small group of major economies with a dedicated legal framework for crypto — alongside the EU, Japan, UAE, and Singapore — while larger markets like the US and India continue to regulate crypto through existing tax and securities law rather than crypto-specific legislation.
What sets Russia apart is purpose: its framework looks entirely built to facilitate foreign trade rather than domestic payments for goods and services.
Countries with Dedicated Crypto Legislation
Countries without Crypto-specific Law
Countries where Private Cryptos are Banned
If Moscow’s state-licensed exchanges can keep trading, other economies sanctioned or semi-isolated by the West will have a template to copy. If they cannot, the West will have shown that squeezing the on- and off-ramps works even against a fully regulated, state-backed counterparty — and that a licence is no sanctions-killer.