EU Moves to Close Crypto Loopholes as Part of Its 20th Sanctions Package on Russia
Brussels is set to adopt a sweeping set of measures that would prohibit all cryptocurrency dealings with Russian entities and extend sanctions to a further 20 Russian regional banks and a handful of foreign lenders.
Overview
The European Union is finalising its twentieth round of sanctions against Russia, with a particular emphasis on the digital‑asset sector that analysts say has become a growing back door for the Kremlin to sidestep existing restrictions. According to a draft European Commission document obtained by the Financial Times, the proposed rules would ban any transaction involving a crypto‑asset service provider that is incorporated in Russia, as well as the use of platforms that facilitate the exchange or transfer of crypto assets originating from Russian territory.
The package, expected to be formally adopted on 24 February, is also set to broaden the list of financial institutions targeted by the EU. In addition to the 20 Russian regional banks already earmarked, the proposal includes two Kyrgyz banks—Keremet and OJSC Capital Bank of Central Asia—as well as banks operating in Laos and Tajikistan. Should the sanctions be approved, the listed entities would be barred from dealing with EU‑based persons and companies.
Crypto‑specific Measures
A blanket ban on Russian crypto service providers
The Commission’s draft states that EU actors may not engage with any crypto‑asset provider that is based in Russia, nor use any platform that enables the transfer or conversion of crypto assets that are linked to Russian jurisdiction. The language is intentionally broader than previous rounds, which chiefly focused on sanctioning specific wallets or exchanges already on EU blacklists.
Targeting the A7 ecosystem
The proposal also appears to single out the payments network A7 and its ruble‑pegged stablecoin, A7A5. The stablecoin, which climbed to the top tier of non‑USD stablecoins by market capitalisation in 2025, has repeatedly denied any involvement in sanction evasion, describing the accusations as politically motivated. Independent analytics, however, have flagged irregular trading patterns that could have artificially inflated its on‑chain volume.
Industry Reaction
A7’s response – The operator of the A7 platform has publicly rejected the EU’s allegations, insisting that its activities comply with existing regulations and that there is no evidence of wrongdoing.
Analyst scepticism – Global Ledger, a blockchain‑analytics firm, warned that the EU’s ability to enforce a comprehensive ban is doubtful. Its co‑founder and CEO, Lex Fisun, argued that decentralized liquidity pools allow tokens such as A7A5 to be swapped into major global stablecoins without passing through any regulated intermediary that could be compelled to apply compliance checks. “Once the assets are routed through large, cross‑border exchanges, tracing and stopping the flow becomes a technical impossibility,” he told Cointelegraph.
Potential market impact – The EU’s move could push Russian users toward fully decentralised solutions or jurisdictions outside the EU’s regulatory reach, potentially fragmenting the European crypto market. At the same time, the sanctions are likely to tighten the supply of Russian crypto on EU‑based exchanges, reducing liquidity for certain trading pairs.
Parallel Developments in Russia
In a related development, the Russian State Duma approved, on third reading, a domestic law that defines the procedures for freezing and confiscating digital assets. The legislation signals Moscow’s intention to retain control over crypto activity within its borders even as external pressure intensifies.
Analysis
- Strategic shift – The EU is moving from targeted, case‑by‑case blacklists to a sector‑wide prohibition, acknowledging that previous sanctions were being circumvented through the creation of new service providers.
- Enforcement challenges – The decentralized nature of many crypto protocols, particularly those that rely on automated market makers and cross‑chain bridges, makes a blanket ban difficult to implement without disrupting legitimate market activity.
- Geopolitical ripple effects – By sanctioning banks in third‑country jurisdictions, the EU aims to choke off indirect financing routes. However, the effectiveness of such measures will depend on the willingness of those jurisdictions to comply and on the robustness of their own AML/CFT frameworks.
- Market reaction – Short‑term price pressure on Russian‑linked tokens and on the broader stablecoin market can be expected, but the extent of the impact will hinge on how quickly crypto platforms implement the new compliance requirements.
- Regulatory precedent – The EU’s approach could set a template for other jurisdictions seeking to block crypto‑enabled sanction evasion, prompting a wave of new legislation aimed at digital assets.
Key Takeaways
- EU sanctions to ban all crypto transactions with Russian entities – a significant expansion beyond prior, narrower measures.
- Additional 20 Russian regional banks and several foreign banks (Kyrgyzstan, Laos, Tajikistan) will be added to the sanctions list.
- A7 and its stablecoin A7A5 are likely to be directly targeted, despite the operator’s denial of any illicit activity.
- Analysts warn that decentralised liquidity may undermine the ban, making full enforcement technically infeasible.
- Russia is simultaneously tightening its own digital‑asset rules, indicating a parallel legal battle over control of the crypto space.
The forthcoming EU package illustrates the growing intersection between traditional financial sanctions and the rapidly evolving crypto ecosystem. While the ambition is clear—cut off Russia’s access to digital‑asset markets—practical enforcement will depend on the ability of regulators and exchanges to monitor and block decentralized flows without crippling legitimate trading activity.
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Source: https://cointelegraph.com/news/russia-crypto-loophole-eu-20th-sanctions-package?utm_source=rss_feed&utm_medium=feed&utm_campaign=rss_partner_inbound
