European Union Considers Blocking Russia-Linked Crypto Transactions—Will Cutting Off Funding Work?

▲ European Union (EU), Russia, virtual assets, cryptocurrency transactions/ChatGPT-generated image

The European Union (EU) is reviewing an additional round of powerful sanctions that would ban all cryptocurrency transactions in order to fundamentally block Russia’s attempts to evade sanctions.

According to crypto media outlet Decrypt on February 16 (local time), the EU is pursuing a measure to prohibit all cryptocurrency transactions to prevent Russia from using digital assets to circumvent sanctions imposed through the existing financial system. The move was revealed through documents obtained by the Financial Times (FT) as part of a new sanctions package related to the war in Ukraine. Through this measure, the EU aims to fundamentally cut off Russia’s ability to use virtual assets as a means of financing the war.

The EU is particularly focused on preventing the emergence of so-called copycat entities that succeed Garantex, a Russian cryptocurrency exchange already under sanctions. The EU believes that platforms similar to Garantex are being used as channels to bypass sanctions and support transactions within Russia. If the new sanctions are finalized, virtual asset service providers within Europe will be required to halt all transactions linked to Russia, with severe penalties imposed for violations.

The proposed sanctions also send a strong warning to neighboring countries accused of assisting Russia in evading sanctions, including Kyrgyzstan in Central Asia. The EU plans to precisely target Russia’s activities involving the trade of dual-use goods or virtual assets through third countries. In particular, it intends to combine export bans with restrictions on virtual asset transactions to prevent electronic components used in drone or weapons manufacturing from flowing into Russia via cryptocurrencies.

The U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) has also supported the EU’s move, analyzing that most funds flowing into Garantex originate from other cryptocurrency exchanges linked to criminal activities. The EU has made clear that it will not tolerate virtual assets being used as loopholes in sanctions under the shield of anonymity. Experts predict that if implemented, the measures would effectively isolate Russia’s cross-border virtual asset transactions.

The virtual asset industry expects the EU’s latest move to accelerate the global trend toward stricter cryptocurrency regulation. Final approval of the sanctions package requires unanimous consent from EU member states, and detailed coordination among governments is currently underway. The EU plans to continue strengthening regulatory mechanisms to enhance transparency in the virtual asset market and block illicit financial flows that threaten international security.

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