New Cryptocurrency Could Enable Russia to Evade Sanctions
Russia’s New Stablecoin A7A5
Background
Since the February 2022 invasion of Ukraine, Moscow has faced a series of international sanctions aimed at halting the war. The West has leveraged economic pressure, but Russia has pivoted to new financial pathways.
Launch and Features
- A7A5 is a stablecoin pegged to the Russian ruble, making it difficult for Western authorities to track transactions.
- The coin was launched by a pro‑Russian Moldovan oligarch and a Russian state‑owned bank as “the first ever ruble‑pegged stablecoin.”
- Unlike dollar‑based alternatives, A7A5’s ruble backing reduces visibility for Western monitoring systems.
Significance
While A7A5 is not yet widely used, its creation marks a strategic step in reducing Russia’s dependence on major crypto companies that often cooperate with Western governments. Experts stress that the stablecoin opens a new payment method for Russian businesses and individuals to sidestep sanctions when trading with foreign partners.
Conclusion
As Russia was expelled from the international banking system SWIFT and subjected to asset freezes and investment bans, Moscow has turned to crypto solutions like A7A5 to navigate financial restrictions imposed by the United States and its allies.
Russia Turns to a New Stablecoin to Bypass Western Sanctions
The SWIFT ban and sweeping sanctions have forced Moscow to look for alternative ways to access the global financial system. The solution most attractive to Russia is a stablecoin that is less volatile than other cryptocurrencies.
Why Stablecoins Appeal to Moscow
- They provide a stable unit that can be used in everyday transactions.
- They can be traded on crypto exchanges that are friendly to Russian interests.
- They allow Russian merchants to receive payments in a currency that is not tied to the US dollar or the EU.
USDT’s Shortcomings
Universal USDT is the most popular stablecoin, but it is linked to the US dollar and controlled by Tether, a company that cooperates with US and EU authorities. Earlier this year, Tether blocked $28 million in USDT held in the wallets of Garantex, Russia’s largest crypto exchange. The exchange was shut down after a global crackdown on illegal transactions.
Russia’s Wake‑Up Call
“That was a real wake‑up call for Russia,” said Elise Thomas, senior investigator at CIR. “It made them think that they need their own stablecoin and something that they control.” Before Garantex was shut down, tens of millions of dollars were moved from USDT into a new coin called A7A5, according to data from crypto tracking firm Global Ledger.
A7A5: The New Russian Stablecoin
- It is backed by deposits in Promsvyazbank, a Russian bank under sanctions for its ties to the government and the military.
- It is traded on Grinex, a crypto exchange based in Kyrgyzstan – a country that is less exposed to Western pressure.
- It is registered in Kyrgyzstan, not Russia, because the country offers a crypto‑friendly legal environment and is less exposed to “sanctions and other economic pressures.”
- Less than six months after its launch, it holds around $150 million.
Legal and Political Risks
These transactions are not necessarily illegal, but they could become problematic if used by sanctioned individuals or entities to reconnect with the global financial system, warned ACAMS’s Voloshin.
Link to Moldovan Politics
The man behind the A7 group, which developed A7A5, is Ilan Shor, a Moldovan businessman and politician who now lives in Russia. Investigators found links between A7A5 and Shor’s political activities in Moldova, including websites related to both sharing the same IP address. These findings have suggested that the cryptocurrency could be used as a tool for political influence.
Shor and his company have already been sanctioned by the UK and more recently by the European Union, which accused them of trying to meddle in Moldova’s 2024 presidential election and its referendum on joining the EU – all while keeping close ties with Moscow.
