Putin leverages cryptocurrency to circumvent sanctions

Russia Turns to Cryptocurrency to Bypass Sanctions

Vladimir Putin’s administration has increasingly relied on digital currencies to sidestep international sanctions during global trade.

According to Chainalysis, a data analytics firm, the use of cryptocurrencies by countries such as Russia, Iran, and North Korea soared by 694% last year, reaching an estimated $100 billion (£74 billion).

Sanctions evasion now dominates the landscape of crypto crime, which overall jumped by 162%, with illicit addresses receiving a record $154 billion in transactions.

Andrew Fierman from Chainalysis noted that these figures are likely underestimates, as more suspicious transactions continue to be uncovered.

Fierman explained that Russia’s adoption of crypto as a primary means to circumvent sanctions has fueled most of the recent surge in activity by blacklisted entities.

In 2024, Russia enacted new regulations to facilitate the use of cryptocurrency for sanctions evasion. The following February, it introduced a ruble-pegged stablecoin named A7A5, which has since been sanctioned. In less than twelve months, this coin has been involved in over $93 billion worth of transactions.

While much of Russia’s trade remains technically lawful, international banks risk facing secondary sanctions if they process payments to or from sanctioned Russian banks.

Last summer, the United States tightened the rules for imposing these secondary penalties, making it significantly harder for Russian businesses to conduct cross-border trade. Cryptocurrencies provide a loophole, as transactions often occur on largely unregulated platforms.

“Nation states have been active on the blockchain since its early days, but the scale of their involvement has grown dramatically in recent times,” Fierman observed.

He added that crypto crime has evolved from individuals using digital assets for ransomware to entire governments moving millions of dollars through these networks.

Fierman cited an example of a drone manufacturer under sanctions, supplying Russia and receiving all payments from a single crypto wallet that handled $40 million in trades. “A wallet like that is almost certainly linked to the Russian government or military,” he said.

The Rise of Stablecoins in Illicit Transactions

Back in 2020, stablecoins—cryptocurrencies pegged to traditional currencies and favored for their stability and ease of cross-border transfer—accounted for just one-eighth of illegal crypto transactions worldwide. Today, they represent 84% of such activity.

Other Nations Leveraging Crypto

Alongside Russia, Iran and North Korea have also made significant use of digital currencies.

Iran’s proxy groups have increased their reliance on crypto for weapons purchases and oil deals. Meanwhile, North Korea orchestrated the largest crypto theft on record last year, stealing $1.5 billion in Ethereum from the Dubai-based exchange Bybit.