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European Union Targets Russia’s Largest Sanctioned Crypto Exchange
The European Council has added Russia’s largest crypto exchange, Garantex, to its sanctions list, citing its close association with EU-sanctioned Russian banks. This move comes two years after the US Treasury’s Office of Foreign Assets Control blacklisted the exchange in 2022.
Garantex’s Operations and Controversies
Garantex, co-founded by Russian tech expert Stanislav Drugalev and former KGB officer Sergey Mendeleev, has been under scrutiny for facilitating illicit transactions. According to Chainalysis, a US-based blockchain intelligence firm, the exchange has helped facilitate payments linked to ransomware gangs and darknet markets, including the notorious Hydra marketplace.
Garantex has also been used by various criminal organizations and terror groups, including Hezbollah. Despite its questionable activities, the exchange remains active and trusted within Russia’s cryptocurrency ecosystem.
Impact of Sanctions on Garantex’s Operations
Andrew Fierman, head of national security intelligence at Chainalysis, notes that the EU’s sanctions will likely have a minimal impact on Garantex’s overall operations. “Trust plays a significant role in the Russian cryptocurrency ecosystem,” Fierman said. “Garantex is generally a trusted platform within Russia and has stable liquidity reserves, making it unlikely users would move away from the platform now.”
Richard Sanders, a US-based digital forensics analyst, suggests that the Russian government has a vested interest in allowing Garantex to operate. “The intelligence value that can be obtained by the Russian government far outweighs their desire to prosecute criminals that by and large profit off of what the government considers to be unfriendly nations.”
Garantex’s Defense and International Cooperation
Garantex has defended its operations, claiming it actively works to prevent illicit activities and cooperates with international law enforcement agencies. However, the US Treasury sanctions from April 2022 highlighted the exchange’s role in facilitating illicit transactions.
Isabella Chase, head of policy for UK and EU at blockchain forensic firm TRM Labs, notes that despite being sanctioned by the US in 2022, Garantex continues to process “billions in transactions annually, allowing cybercriminals and sanctioned entities to launder illicit funds with minimal oversight.”
Increase in Enforcement and Alternative Platforms
The EU’s sanctions on Garantex aim to further restrict its ability to operate internationally, increasing the difficulty of laundering illicit funds. However, enforcement is key — without strong international cooperation, cybercriminals may shift their activity to alternative non-compliant exchanges or decentralized platforms.
TRM Labs has identified the exchange as a major facilitator, and other underground banking networks, peer-to-peer platforms, and decentralized finance services also “remain alternatives for criminals looking to move funds.”
International Security and Global Crypto Market Concerns
Despite efforts to appear cooperative with law enforcement, Garantex’s deep ties to the Russian government and questionable actors raise concerns, with analysts warning that its ongoing operation under Kremlin oversight threatens international security and the global crypto market.
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