A Kremlin-backed cryptocurrency operation appears to have succeeded in circumventing US sanctions, moving at least $6bn since August when some of its entities were blacklisted — highlighting the limits of western efforts to curb Russia’s financial flows.
More than 80 per cent of A7A5, a stablecoin at the heart of Russia’s growing cross-border payments empire, was swiftly destroyed and recreated to be cleared of links to a crypto exchange that had been just sanctioned by Washington, according to a Financial Times analysis.
A7A5 is part of A7, a growing cross-border payments system built as an alternative to the US-led financial system, from which Russian lenders were cut off after Moscow’s invasion of Ukraine in 2022.
Washington added Grinex, a Kyrgyzstan-based exchange, to its sanctions list in August, the latest step in its attempt to curb Russia’s crypto infrastructure. Grinex is an alleged successor of Garantex, which US law enforcement took down in March for “hacking, ransomware, terrorism and drug trafficking”.
Grinex denies any connection to Garantex.
Some content could not load. Check your internet connection or browser settings.
According to the FT analysis, starting the day after the August designation A7A5 administrators deleted the contents of two wallets connected to Grinex, which were carrying a total of 33.8bn tokens worth $405mn. That represents more than 80 per cent of the total number of A7A5 in circulation.
The wallets’ account balances were set to zero using an instruction called “destroyBlackFunds” that designates their tokens as “dirtyShares”.
But soon after, tokens worth the same amount were created in a new wallet, in effect moving the funds and giving them a clean slate.
Unlike a regular transfer, this method breaks the link between the old and new accounts, making it harder to establish a connection between the tokens that had been targeted by sanctions and the newly-minted ones.
This wallet, named TNpJj, was involved in $6.1bn worth of transactions since August, the FT found.
Activity on the new wallet mirrors patterns observed on its predecessors. The wallet has shared 11 counterparties and executed transfers during Moscow working hours. Activity peaks between 10am-12pm local time, with little movement overnight or on weekends.
A7A5’s chatbot offers customer support “weekdays from 10am to 8pm Moscow time”. Clients can also buy the token in cash at their “over-the-counter section of Grinex” housed in a Moscow skyscraper. Garantex shared the same address — Federation Tower, 14th floor.
Setting up the new wallet suggests the operators of A7A5, which trades on Tron and Ethereum blockchains, have drawn lessons from the takedown of Garantex. Back then, Tether, the issuer of the dollar-pegged stablecoin USDT, froze $28mn held in wallets linked to Garantex.
A7A5 is registered in Kyrgyzstan, a jurisdiction Moscow designates as “friendly”, unlike most western countries. The coin’s registered issuer is a Kyrgyz company called Old Vector, which was also blacklisted by the US in August.
Russian authorities last week granted A7A5 formal digital financial asset status. This allows exporters and importers to use it officially through a platform owned by Promsvyazbank, which backs each token with a rouble, according to the A7A5 issuer.
A Russian state-owned defence lender under western sanctions, Promsvyazbank also holds a 49 per cent stake in the A7 cross-border payments network that is rapidly expanding, including to Africa.
The bank’s chief executive Petr Fradkov last month told Russian President Vladimir Putin “we are creating a system of cross-border settlements based on A7”. The network has also received significant loans from Russia’s VEB, a state development bank which traditionally supports the Kremlin’s priority projects.
VEB and Promsvyazbank did not immediately respond to requests for comment.
A7 claims to have moved more than $86bn in 10 months, according to its majority owner and chief executive, Ilan Șor — a fugitive Moldovan oligarch living in Moscow.
Recommended
Overall, A7 may now account for a large chunk of Russia’s cross-border payments market, two financial professionals involved in that market told the FT. In addition to crypto, the A7 network also offers more traditional services, including payments via promissory notes.
“A7 is expanding at rapid pace funded in large part by loans from Russian state institutions,” the Centre for Information Resilience (CIR), a London-based non-profit research group, noted in a report. Russia’s worsening war economy was likely to increase the “political significance” of the network in enabling exports, it added.
A7 and A7A5 did not immediately respond to requests for comment.
In June, an A7A5 representative told the FT they had only “co-operated with the technical team of A7 at the early stage”, and then “decided to separate completely” in May.
“We’ve created a transparent and honest business: we pay taxes and operate openly,” A7 owner Șor told the Kommersant newspaper last month, noting other countries were showing interest in this “alternative payment system that is “beneficial” for the Russian state.
Additional reporting by Polina Ivanova in Berlin
