Europe's "Crypto Strike" on Russia
When stablecoins become geopolitical
Last week, Europe passed its 19th sanctions package against Russia, after Slovakia withdrew its veto. Some of the rules target Russia’s energy exports, including a bloc-wide ban on Russian LNG by 2027, along with going after the Russian shadow fleet. Other rules take aim at Russia’s financial sector, including cryptocurrencies. The EU has banned European firms from supplying Russia with “crypto services” that could help Moscow build financial systems out of Western control. However, the biggest move was a ban on “A7A5”—a stablecoin pegged to the Ruble that is issued in Kyrgyzstan.
A7A5 is now banned throughout the EU. Alongside this, the EU has imposed sanctions on trading platforms and exchanges that enabled the stablecoin, as far as Paraguay in South America.
CRYPTO INTERFERENCE
This is no small move. A7A5 was launched in January by Promsvyazbank (PSB) and its payments arm, A7, via a Kyrgyz-registered issuer, Old Vector. The parties developed A7A5 to settle cross-border trade—implicitly bypassing Western sanctions. The growth of A7A5 has been extraordinary. According to some estimates, it is the largest non-US dollar stablecoin in the world, with over $70 billion in transfers (recorded transactions with A7A5 on a blockchain) since its unveiling.
This is not just about “settling trade" or “bypassing sanctions.” In September, as Moldova held elections, reports surfaced that A7A5-linked wallets were active in political funding networks. Then, in Singapore, TOKEN2049, one of the biggest crypto events in the world, was sponsored by A7A5.
The EU’s unprecedented move against A7A5 draws crypto deeper into geopolitics, beyond simply being a “hedge” for investors skittish about war in the Middle East or the devaluation of FIAT currencies.
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What Europe has done is two-fold.
The EU has opened the door to banning crypto within the economic union on the basis of geopolitics. This is not just about Russia (or China).
The EU is racing to meet the US head-on as the majority of stablecoins are pegged to the US dollar.
Combined with the GENIUS Act passed in July, which requires issuers of USD-stablecoins to have equivalent value in cash (dollars) or bonds, Europe is facing a bigger erosion of the euro in financial markets. By going after A7A5, there is now precedent to ban stablecoins if tensions spike—like a US-EU trade deal going sideways or serious rifts forming over security.
CRYPTO SPLIT
At the same time, Europe has fractured global crypto markets into “official” and “grey” channels. While the world of crypto trading was always “in the grey,” it is more so now. Certain currencies are being driven truly underground, forcing exchanges to decide what crypto to allow based on the geopolitics of the moment.
The war in Ukraine is creating new fault lines in crypto movements—some exchanges will stand by banned currencies, becoming hubs for sanctions evasion, while others will restrict them, aligning with certain nations.
However, surrounding all of this is a bigger challenge.
Europe is going after A7A5 because its popularity is exploding—inside and outside of Russia. Besides the US and UK, which have also aimed at the stablecoin, few others are cracking down on it. The Western sanctions are being evaded by actors across the world who still want to trade with the Russian economy—and are turning to crypto to do so.
SANCTIONS CONTROL
The West is now doubling (or tripling) down on sanctions through crypto. By banning A7A5, and likely other stablecoins in the future, Western governments are reinforcing their sanctions mandates. Except, while A7A5 is banned within the EU, it remains active across the global economy. This leads to the big question of what comes next. Will Europe expand its sanctions and punish non-European companies/countries that engage with A7A5, like paying for oil from the shadow fleet?
If so, it will pull crypto into the middle of the geopolitics between the West, Russia, Ukraine, and the world, and could end up raising questions on everything, from Ethereum to Bitcoin, as governments seek to bolster economic security and block their adversaries.
-ABISHUR PRAKASH AKA. MR. GEOPOLITICS
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