Blanket crypto ban targets Russia rails but one chokepoint decides whether flows die or just relocate offshore

The European Commission's 20th sanctions package proposes a comprehensive ban on all cryptocurrency transactions involving Russia, an escalation from targeting specific bad actors to attempting to sanitize the rails themselves.

The question is whether the EU can raise the cost of evasion sufficiently by controlling chokepoints: regulated exchanges, stablecoin issuers, and third-country financial intermediaries.

The proposal arrives at a moment when enforcement data already tells a clear story about displacement.

Between 2024 and 2025, flows to and from sanctioned entities via centralized exchanges fell roughly 30%, according to TRM Labs.

Over the same period, flows through high-risk, no-KYC, and decentralized services increased by more than 200%. Russia hasn't stopped using crypto for cross-border trade and sanctions evasion. It has simply moved the activity to venues beyond the reach of Western compliance infrastructure.

What's actually new and what's already banned

The EU's Russia sanctions framework already prohibits providing crypto-asset wallet, account, or custody services to Russian nationals, residents, and Russia-established entities.

The 19th sanctions package went further, banning transactions involving A7A5, a Russia-linked stablecoin that Chainalysis estimates has processed $93.3 billion in less than a year.

The Commission has also sanctioned specific infrastructure associated with Russia's crypto ecosystem, including platforms such as Garantex and the broader A7 network.

So what does a “blanket ban on all crypto transactions involving Russia” add?

The most plausible reading is that it broadens the perimeter beyond custody services to include any EU person or business that deals with Russia-linked crypto service providers or facilitates Russia-related transactions.

The draft language explicitly flags third-country facilitators, signaling that the EU intends to pursue intermediaries outside its direct jurisdiction. This is the shift from “sanction the actor” to “sanitize the rail,” an attempt to make the infrastructure itself unusable, rather than just blocking individual entities.

How evasion works and matters more than actors

Sanctions evasion in crypto operates across three layers: identity, jurisdiction, and instrument.
Identity evasion is the easiest and least interesting, such as fake KYC, shell entities, and nominee accounts.

Jurisdiction evasion is where the real action is: routing through non-EU virtual asset service providers, over-the-counter desks, Telegram-based brokers, and third-country banks that don't enforce EU sanctions.

Instrument evasion means shifting to stablecoins and bespoke payment rails that bypass traditional banking chokepoints.

Stablecoins dominate this landscape. Chainalysis reports that stablecoins account for 84% of illicit transaction volume, and that share is growing as enforcement pressure on regulated exchanges rises.

A7A5, the Russia-linked stablecoin already sanctioned by the EU, exemplifies the strategy: a tokenized payment system designed to replicate correspondent banking functions without relying on Western financial infrastructure.

The Garantex case study illustrates how enforcement can disrupt these rails, but also how quickly activity reconstitutes.

Garantex, a Moscow-based exchange sanctioned by the US in 2022, continued operating until Reuters reported that Tether blocked wallets associated with the platform.

The service suspended operations almost immediately, demonstrating that stablecoin issuers can act as a decisive chokepoint. But reporting also indicates that Garantex-linked activity migrated to Telegram-based services and other offshore venues.

What happened was displacement, not elimination.

Stablecoins, issuers, and third-country pressure

The EU's blanket ban can be effective if it controls the right chokepoints.

The most important is stablecoin redemption. Stablecoins like USDT and USDC are bearer instruments, but they still require on- and off-ramps to convert into fiat or other assets.

If Tether, Circle, and other issuers cooperate with EU sanctions by freezing wallets or blocking redemptions tied to Russia-linked addresses, the friction cost of evasion rises sharply.

The Garantex episode proves this mechanism works, at least tactically.

The second chokepoint is third-country facilitators. If Russia-linked actors can cash out via exchanges in jurisdictions that don't enforce EU sanctions, the ban's impact on total activity will be minimal.

The Commission's explicit focus on third-country facilitators suggests awareness of this risk, but execution is harder.

The EU lacks direct enforcement power over non-EU entities, so it must rely on secondary sanctions, diplomatic pressure, or access restrictions to EU financial markets.

The third chokepoint is supervision of EU-regulated crypto asset service providers. If CASPs comply rigorously, Russia-linked flows touching EU platforms drop sharply. If enforcement is patchy or slow, displacement dominates.

The 30% decline in flows to sanctioned entities via centralized exchanges already reflects baseline compliance.

The futures for Russia-EU crypto flows

The impact of a blanket ban depends on the enforcement scenario.

The first scenario is compliance-only, in which EU CASPs comply with the ban. Offshore routes and no-KYC venues remain accessible. EU-touchpoint flow declines by 20%-40%, then by 60%-80%.

However, 60%-80% of the displaced flow reappears via non-EU platforms, decentralized exchanges, and Telegram-based brokers.

Total Russia-linked crypto activity barely changes, and the EU loses visibility and leverage.

The second scenario involves a chokepoint squeeze, in which the EU coordinates with stablecoin issuers and targets third-country facilitators through secondary sanctions or market-access restrictions.

EU-touchpoint flow falls 50%-75%, to 25%–50%. Evasion costs rise sharply: wider spreads in over-the-counter markets, more intermediaries, greater reliance on bespoke rails like A7A5. Total activity continues, but Russia pays a premium in friction and counterparty risk.

The third scenario falls into a symbolic enforcement. Unanimity stalls, supervision remains uneven, and third-country reach is weak. EU-touchpoint flow falls 0-20%, to 80%-100%.

Evasion adapts faster than enforcement. The ban becomes a diplomatic signal rather than an operational constraint.

What actually determines the outcome

The final legal text matters. If the ban defines “transactions” narrowly, addressing only direct transfers between EU entities and Russia-linked addresses, it's easier to evade via intermediaries.

However, if it defines the scope broadly to include any EU person facilitating Russia-linked crypto activity, enforcement becomes more challenging, but the potential impact increases.

Stablecoin issuer cooperation matters more. Tether and Circle are private companies, not EU agencies. If they treat sanctions compliance as a cost center rather than a strategic priority, enforcement fails. If they treat wallet blocking and redemption refusals as a reputational and regulatory necessity, the rails become much harder to use.

Third-country pressure matters most for displacement control.

If Russia can cash out via exchanges in the UAE, Turkey, or Central Asia without friction, the EU ban reroutes flows. If the EU can impose secondary sanctions or market-access restrictions that force third-country banks and CASPs to choose between EU access and Russia-linked business, evasion costs rise sharply.

A7A5 activity is the leading indicator. The EU has already targeted the token and the broader A7 network.

If transaction volume migrates further into bespoke stablecoin rails that don't touch EU-regulated infrastructure, it signals that the ban is functioning as a displacement mechanism rather than a constraint.

The honest endgame

The EU can make Russia's crypto routes more expensive and less convenient.

Regulated EU exchanges and custodians will shut their doors to Russia-linked flows, and the compliance baseline will tighten.

Yet, unless the EU can control stablecoin issuers, coordinate with third-country regulators, and maintain consistent supervision of its own CASPs, the blanket ban will function more like a reroute order than a shutdown.

Russia will still use crypto for cross-border trade and to evade sanctions. It will just do so through venues the EU can't see, at costs Russia has already demonstrated it's willing to pay.

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