The European Union is set to implement its 20th sanctions package against Russia, proposing a comprehensive ban on all cryptocurrency transactions. This marks a significant strategic shift from targeting individual sanctioned entities to an ambitious attempt to "sanitize the rails" – making the entire crypto infrastructure unusable for Russia. The core challenge lies in the EU's ability to control critical chokepoints, given past data shows Russian crypto activity merely migrated to less regulated, high-risk venues rather than ceasing.
Shifting Sanctions Strategy Amidst Evasion Trends
Previous EU sanctions already prohibited providing crypto services to Russian nationals and entities, and even targeted specific platforms and Russia-linked stablecoins like A7A5, which processed billions. However, enforcement data reveals a clear displacement effect: while flows to sanctioned entities via centralized exchanges fell, activity through high-risk, no-KYC, and decentralized services surged. This new "blanket ban" aims to broaden the perimeter, encompassing any EU person or business facilitating Russia-linked crypto activity, explicitly flagging third-country facilitators. The intention is to make the infrastructure itself harder to use, rather than just blocking individual actors, as evasion primarily occurs through jurisdiction (non-EU platforms) and instrument (stablecoins bypassing traditional banking).
Critical Chokepoints for Effective Enforcement
For the blanket ban to be effective, the EU must gain control over several crucial chokepoints. Firstly, stablecoin issuers like Tether and Circle are paramount. As stablecoins dominate illicit transaction volumes, their cooperation in freezing wallets or blocking redemptions tied to Russia-linked addresses could significantly raise the cost of evasion, as demonstrated by the Garantex case study. Secondly, third-country facilitators present a major hurdle. If Russian actors can easily cash out via exchanges in jurisdictions not enforcing EU sanctions, the ban's impact will be minimal. The EU must exert diplomatic pressure, impose secondary sanctions, or restrict access to its financial markets to compel compliance from these external players. Lastly, rigorous supervision of EU-regulated crypto asset service providers (CASPs) is essential to ensure a strong compliance baseline and prevent further displacement of flows.
Potential Outcomes and Key Determinants
The ultimate impact of this blanket ban hinges on the depth of its enforcement. A "compliance-only" scenario, where only EU CASPs comply, would likely see Russia-linked flows decline within EU touchpoints but reappear via offshore, decentralized, and Telegram-based services, diminishing EU visibility. A more impactful "chokepoint squeeze" scenario would involve coordinated action with stablecoin issuers and aggressive targeting of third-country facilitators, significantly raising friction and costs for Russia, albeit without eliminating activity entirely. Conversely, "symbolic enforcement" due to slow unanimity or weak third-country reach would render the ban a mere diplomatic signal with minimal operational effect. The final legal text's scope, the willingness of major stablecoin issuers to cooperate, and the EU's ability to exert pressure on third-country entities will determine whether this ambitious package successfully constrains Russia's crypto activities or simply forces them further into the shadows.
