Russia has found a new way to circumvent Western sanctions: according to the Financial Times, a new cryptocurrency, A7A5, has been launched in Kyrgyzstan and has already moved more than $9 billion.
Russia is skirting Western sanctions with a new cryptocurrency, A7A5, launched in Kyrgyzstan by a fugitive Moldovan oligarch. The token, which is the first stablecoin pegged to the Russian ruble, has already moved about $9.3 billion through the Grinex crypto exchange in four months, according to the Financial Times.
This was reported by the Financial Times.
Sanctions evasion scheme and suspected influence mongering
Launched in February, the A7A5 token was designed to simplify large financial transactions for Russia, which are complicated by international sanctions. According to an analysis by the Financial Times, $9.3 billion in this token has already been moved through the Grinex crypto exchange (which only trades A7A5, rubles, and USDT).
The stablecoin is said to be backed by ruble deposits at Moscow's Promsvyazbank, a bank under US, UK and EU sanctions over Russia's full-scale invasion of Ukraine. There are currently 12 billion A7A5 tokens in circulation (worth about $156 million). They are actively used by a small group of people whose daily transfers often exceed that amount.
Moreover, as noted by the Centre for Information Resilience (CIR), a London-based non-profit research group, the A7A5 token appears to be linked to Moscow’s efforts to use cryptocurrencies to fund political influence campaigns abroad. CIR found that several domains used in political influence operations in Moldova shared an IP address with the A7 and A7A5 sites.
The role of Ilan Shor and connections with Garantex
A7, the company behind the A7A5 token and subject to UK sanctions, is owned by Moldovan businessman Ilan Shor. Shor, who escaped house arrest in Moldova in 2019 after being convicted of stealing $1 billion in a major banking fraud, received Russian citizenship. Last year, Moldovan police accused him of organizing mass vote-buying, which Ilan Shor called an absurd spectacle.
The creation of A7A5 comes amid increased scrutiny of Russia-related transactions and the exclusion of some Russian banks from the international Swift messaging system.
“Russian business and government officials have been talking for some time about how they could use cryptocurrency to evade sanctions at scale, including by creating their own stablecoin,” said Elise Thomas, a senior investigator at CIR.
Leonid Shumakov, director of A7A5, explained the choice of Kyrgyzstan as a “friendly jurisdiction that is not so susceptible to sanctions” and which “helps a lot to cope with the pressure [on Russia].”
Russians can buy A7A5 on the Tron or Ethereum blockchains and then exchange these tokens for USDT (Tether), a cryptocurrency pegged to the US dollar. This allows them to withdraw money in any country or currency. According to Shumakov, A7A5 serves as a “bridge for a safe transition” to USDT. Many owners of the token are likely Russian importers. The company says that for every ruble spent on purchasing A7A5, one ruble is credited to an account at Promsvyazbank, and this has been confirmed by an independent Kyrgyz auditor.
A7A5 and Grinex emerged and expanded after the closure of Russia’s largest crypto exchange, Garantex, which was blocked by U.S. law enforcement in March. Tether then froze $23 million in USDT held in Garantex’s wallets. Garantex called it a “war on the Russian crypto market.”
Analysts believe that Grinex is likely the successor to Garantex. CIR’s investigation found that Grinex and the issuer A7A5 were registered in Kyrgyzstan in the same week. According to Tom Robinson, chief research officer at Elliptic, “Garantex users who had outstanding balances at the time of closure may have offset those balances against new accounts created on Grinex.”
A Grinex spokesperson said they “captured market opportunities following the closure of Garantex as part of their growth strategy” and “gained some of the non-toxic customer base” of A7.
Political influence and future plans
In May, the UK added A7 to its sanctions list. Despite this, Shor said at the forum that A7 was creating a new, relatively invulnerable payment system. It would involve the exchange of securities and “non-politicized” instruments, such as precious metals, to bypass regulatory controls. According to him, cryptocurrency would be just one of the directions of this system. The CIR research group also found that A7 was looking for specialists in China, the UAE, Kyrgyzstan, and the temporarily Russian-occupied territories of Ukraine.
Last year, according to the U.S. Office of Foreign Assets Control (OFAC), Shor was involved in negotiations with Bank Keremet in Kyrgyzstan to “establish a sanctions evasion center where Russia could pay for imports and receive payments for exports.” OFAC sanctioned the bank in January.
Let us recall that Deputy Chairman of the Russian Security Council Dmitry Medvedev, who acts as the Kremlin's main mouthpiece on social networks, said that the European Union has become Russia's enemy. According to him, the EU poses a “direct threat” to the aggressor state.
