The European Commission has proposed a blanket ban on cryptocurrency transactions linked to Russia and new trade restrictions on Kyrgyzstan in an effort to close loopholes used by Moscow to fund its war in Ukraine. 

Under a commission proposal reviewed by the Financial Times, the EU would prohibit engagement with any crypto-asset service provider established in Russia and bar the use of platforms that enable the transfer and exchange of crypto assets within the federation.  

EU officials believe that the bloc’s previous approach of blacklisting individual crypto-service providers has become a game of whack-a-mole, as new entities can be set up quickly to sidestep restrictions and fund trade in dual-use goods deployed in the war, the newspaper said. 

“Any further listing of individual crypto-asset service providers… is therefore likely to result in the set-up of new ones to circumvent those listings,” the commission said in an internal document cited by the FT. “In order to ensure that sanctions achieve their intended effect, [the EU] prohibits to engage with any crypto asset service provider, or to make use of any platform allowing the transfer and exchange of crypto assets that is established in Russia.” 

The commission is separately seeking export bans on at least two dual-use goods out of Kyrgyzstan: radio equipment and computer-controlled CNC machines, according to RadioFreeEurope/RadioLiberty (RFE/RL), which also cited the commission’s proposal. 

The new sanctions package would target Kyrgyz cryptocurrency company CJSC TengriCoin for its alleged role in facilitating the trade of A7A5 stablecoin, the news outlet said. Russia is believed to have exploited A7A5 to sidestep international sanctions. 

If adopted, the Kyrgyzstan measures would mark the first use of the EU’s new anti-circumvention powers, a tool designed to clamp down on financial activity and trade outside of Russia that Moscow uses to undermine sanctions, according to the FT. 

The commission’s proposed crypto bans appear tailored to prevent the emergence of successors to Garantex, a Russia-linked cryptocurrency platform that the United States sanctioned in 2022 for “operating as the exchange of choice for cybercriminals,” the newspaper said. 

The package would also target maritime services linked to Russian oil exports. The Commission is proposing a full ban on services to ships carrying Russian crude oil, cutting off insurance, maintenance, and other support services for tankers, and effectively replacing the current regime that targets only oil sold above a G7 price cap, the FT reported. 

Under the draft proposal, the bloc would impose sanctions on two businesses controlled by Uzbek businessman Rustam Rakhimdzhanovich Muminov, RFE/RL reported. The businesses, Fargona Kimyo Zavodi LLC and Raw Materials Cellulose LLC, supply cotton pulp to gunpowder plants in Russia. 

Two Russian buyers of Uzbek cotton products, Dmitry Malyuta and Denis Shishkin, would be blacklisted as well, according to the report. 

Whether the commission’s proposal will be adopted remains unclear. All 27 EU member-states would need to approve of the sanctions before they could be implemented across the bloc and representatives from three European nations have expressed doubts about the plan, according to the news outlets. 

Germany, which remains a major exporter of machinery and electronics used for CNC and radio equipment in Kyrgyzstan, may oppose the plan, RFE/RL said. 

Read more at the Financial Times

Read more at RFE/RL