Author | Joey Wu talks about blockchain

At the end of March 2025, a seemingly insignificant cryptocurrency exhibition ended in Moscow. Crypto Summit was so small that it could be visited in ten minutes, but it unexpectedly brought together the focus from the government, industry, technology and finance: Under the financial blockade of war and sanctions, how can the CIS (Commonwealth of Independent States) region find a way to survive and break through with the help of stablecoins and blockchain technology?

This report is based on on-site observations at the exhibition, conversations with officials, and in-depth data analysis of multiple local projects, to restore the cryptocurrency ecosystem that is taking shape in the CIS region and the digital financial ambition of "non-dollarization". The report will start with three parts: exhibition situation, policy interpretation, and CIS local projects.

Heat in lockdown: Observations from Moscow Crypto Summit

Crypto Summit was held at MTS LIVE HALL in Moscow from March 19 to 20. It is the most important annual event in the crypto industry in Russia. The conference was sponsored by BingX, with Algorithm as the chief partner, and brought together many leading Chinese and Russian companies such as FBOX, Intelion, and MEXC. The agenda covered hot topics such as the prospects of the crypto market in 2025, Russian regulatory policies, BRICS digital assets, Web3 trends, mining and investment, and attracted many guests including Russian Deputy Minister of Finance Ivan Chebeskov, State Duma officials, central bank representatives, and CEOs of leading companies to give speeches.

The exhibition is limited in scale - the entire exhibition area can be visited in ten minutes, but it has a high degree of regional characteristics. The composition of the exhibitors clearly reflects the reality of the CIS blockchain industry: 40% are mining machine sellers, all equipment is made in China, and Chinese manufacturers have formed a monopoly in the CIS mining market; 25% are crypto exchanges, including BingX and MEXC, which have outstanding performance locally, Bitget, which exhibits on a small scale, and local CEX platforms Keine and Rapira; DEX platforms include Storm based on TON and Alpha DEX focusing on Meme coins; 15% are cross-border payment and asset transfer service providers, specially created for Russian companies to bypass international sanctions; 10% are KOLs, media, and blockchain associations, and the rest are small project parties that provide compliance services such as anti-money laundering.

The language environment, communication atmosphere and crowd composition of the entire exhibition highlight the extreme localization and closedness of the CIS market: most exhibitors do not use English and have loose connections with the international crypto market. Crypto entrepreneurs are generally active in the Middle East. Dubai has become the center of Russian crypto entrepreneurs. Crypto entrepreneurs who have lived in the CIS region for a long time are rare. War, conscription and high pressure on supervision have created a "double vacuum" of local talent loss and project flight.

However, mining business is a highlight. Russia has shown tolerance and even encouragement towards the mining industry at the policy level. Many Chinese exhibitors revealed that "mining machines are selling very well in Russia", indicating that the market still has a large demand for hardware.

The exhibition itself was small, but Russia attached great importance to it. Officials from the Ministry of Finance, Ministry of Internal Affairs, Parliament and experts from the BRICS digital economy cooperation all participated in the exhibition. They continued to speak and interpret policies on site, setting the tone for the future direction of crypto regulation in the CIS region.

Breaking through the cracks of sanctions: Interpretation of CIS encryption policy

Under the current background of high geopolitical tensions and increasing economic sanctions, Russia is gradually forming a set of cryptocurrency policy paths with its own characteristics. The core of this policy system is to explore cross-border payment and financial sovereignty solutions that bypass the Western financial system based on stablecoins and blockchain.

The meeting released three major policy signals:

First, include crypto assets in the "de-dollarization" strategy and build a local stablecoin; second, improve relevant laws and regulations, and open special administrative regions to conduct cryptocurrency compliance sandbox pilots; third, in terms of international cooperation, strengthen cooperation with BRICS countries and develop a cross-border settlement framework of "multilateral anchoring and currency mutual recognition" under the BRICS mechanism. Overall, Russia's crypto policy is gradually shifting from defensive response to strategic deployment, emphasizing the reconstruction of financial sovereignty and global settlement capabilities through digital technology under the pressure of sanctions.

Local Stablecoins

A7A5, a ruble-based stablecoin

In February 2025, Old Vector, a company registered in Kyrgyzstan, launched a new stablecoin called A7A5, pegged 1:1 to the Russian ruble. The digital asset is intended to facilitate cross-border payments between Russia and other countries, especially in the context of current sanctions. The project team reports that the liquidity of the new stablecoin is provided by "real bank deposits with high overnight interest rates opened at reliable banks (PSBs) with a correspondent network in Kyrgyzstan." Old Vector promises to publish weekly reserve reports and undergo independent audits every six months.

A7A5 technical features, safety and operating environment

A7A5 is released on the Ethereum (ERC-20 standard) and TRON (TRC-20 standard) blockchains, ensuring wide compatibility and ease of use. The liquidity of the stablecoin is provided by ruble deposits held at the Russian Industrial Bank (PSB), which maintains a correspondent relationship with financial institutions in Kyrgyzstan. Users can store A7A5 in decentralized wallets such as Trust Wallet and OKX Web3 Wallet, as well as in accounts on supported exchanges. To ensure security and compliance, the A7A5 smart contract has built-in functions for freezing (blacklisting) and burning (BurnBlackFunds) tokens in certain wallets. Other stablecoin issuers, such as Tether, also use similar mechanisms to prevent illegal transactions and protect users.

On March 6, 2025, Garantex exchange suspended operations and trading on the platform due to the freezing of Tether (USDT) worth 2.5 billion rubles. In addition to the asset freeze, the U.S. Secret Service blocked the Garantex website with the support of Europol and German and Dutch law enforcement officers. U.S. authorities accused the exchange of having links with extortion hackers and darknet illegal markets. The exchange said in a statement: "We have bad news. Tether has joined the war on the Russian cryptocurrency market and has frozen our wallets worth more than 2.5 billion rubles. We will temporarily suspend all services, including cryptocurrency withdrawals, while our entire team works hard to resolve this issue." Garantex said that the exchange is a leader in ruble liquidity and provides Russian users with unrestricted access to cryptocurrencies. The platform supports rubles and any Russian bank card. According to Garantex, the USDT stablecoin is the most popular cryptocurrency among Russians. The exchange's trading volume for the ruble-USDT pair far exceeds that of other cryptocurrency pairs. The platform team draws attention to the fact that all USDT tokens located in Russian wallets may now be compromised.

On February 24, the European Union included the Russian cryptocurrency exchange Garantex in a new round of sanctions against Russia. This is the first time the EU has imposed restrictions on a Russian cryptocurrency exchange. The platform has been under US sanctions since April 2022.

The official statement of the sanctions stated that Garantex has close ties with Russian banks that have been sanctioned by the European Union. Specifically, platform users can deposit and withdraw funds using cards from the Russian Federal Savings Bank, T-Bank (formerly Tinkoff Bank) and Alfa Bank, which have been sanctioned under European legislation. The ruble-based stablecoin A7A5 successfully responded to the freezing of the Garantex exchange and was called "the first case of self-rescue in the crypto market." (Reported from rbc.ru)

Passive Income Mechanism A7A5

One of the unique features of A7A5 is the ability to generate passive income. According to the project whitepaper, 50% of the daily earnings of overnight deposits are distributed to stablecoin holders. Accumulation occurs automatically without additional action from the user. Overnight deposits are short-term bank deposits where funds are held overnight and returned the next day along with accrued interest. If deposited before a weekend or holiday, the deposit period is extended to the next business day and interest is calculated for the entire deposit period.

Taking the A7A5 stablecoin as an example, the income of holders is generated by depositing reserve funds into overnight deposits, which provides a stable and predictable passive income. InDeFi SmartBank founder Sergey Mendeleev told Bits.media that the A7A5 contract is standard, the only difference is that it uses a mechanism to automatically calculate interest for token owners, essentially playing the role of a bank deposit.

“I am certainly happy that the cryptoruble concept, which we proposed a year and a half ago, has received so much support and such a solid implementation. Now we can respond to the criticism of the Central Bank and Financial Supervision Service. I hope that people will be able to buy these tokens for fiat currency or, conversely, sell them for real rubles at any PSB branch,” Mendeleev said.

Earlier, sources from the Hash Telegraph publication reported that the American company Tether is actively adding wallet blacklists and blocking users from accessing the USDT stablecoin.

A7A5 Availability on Exchanges

Cryptocurrency exchange Garantex announced that it has launched the "first secure and regulated ruble stablecoin". The platform offers A7A5 trading pairs with ruble and USDT. In addition, the Bitpapa market has opened up the possibility of crypto-ruble trading, which expands the use cases of A7A5 in various transactions. The issuer plans to publish reserve reports every week and conduct independent audits every six months to ensure transparency and user trust.

The launch of A7A5 represents an important step in the development of digital financial instruments, which will help simplify and speed up international settlements for Russian companies. The combination of ruble peg, passive income and built-in security mechanisms make A7A5 an attractive tool for companies engaged in foreign economic activities. Material reference (vc.ru)

Russian local exchange Garantex

The cryptocurrency exchange emerged in Estonia in 2019, but initially focused on the Russian market. Sergey Mendeleev, one of the co-founders of the platform and former mayor of Moscow's Yasenevo district, called Garantex an innovative cryptocurrency startup that provides customers with zero-spread, zero-commission fiat-to-cryptocurrency exchange services. "We decided to temporarily do a non-commercial project, the main goal of which is to directly connect sellers and buyers of cryptocurrencies through an established average weighted exchange rate that is beneficial to both parties," Mendeleev said in a 2019 interview.

Mendeleev's partner was Stanislav Drugarev, the founder of the hosting provider Caravan-Telecom. Under their leadership, the exchange operated for two years. In February 2021, Drugarev died in a car accident in Dubai. A month later, Mendeleev sold his shares in Garantex to Irina Chernyavskaya. What he does is not known. According to The Bell, another co-owner of the site could be Alexander Ntifo-Siao. The US Department of Justice still lists him as one of the beneficiaries of the exchange, but under a different name: Alexander Mira Cerda. In December 2021, he and his partner Pavel Karavitsky became co-owners of the Russian legal entity Fintech, the owner of the garantex.academy domain seized by US authorities. Some media outlets have linked Karavitsky to Russian intelligence services. He allegedly worked as an economic security expert at VBRR Bank and Peresvet Bank, as well as a “security officer” at Garantex Bank. It is not clear who owns the cryptocurrency exchange.

What is Garantex Cryptocurrency Exchange Known For?

After the international payment systems left Russia and banks were banned from cross-border transfers, Garantex began to describe itself as a platform that “does not comply with EU and US sanctions against Russian users” and cooperates with everyone.

The exchange itself was sanctioned by the United States as early as the spring of 2022, but not for helping to circumvent sanctions: US authorities suspected it of laundering more than $100 million involving Russia's largest dark web market, which was closed by US and German intelligence agencies in March 2022. Chainalysis researchers point out that the amount of suspicious transfers is even larger: $645 million was transferred between 2019 and 2021. However, sanctions did not stop the exchange's growth. Market participants told The Bell that after Binance withdrew from the Russian market, Garantex became the largest platform for exchanging and withdrawing rubles. Businesses that need to pay for overseas supplies also began to trade cryptocurrencies through the platform.

In March 2024, US and UK authorities began investigating $20 billion in transactions conducted through Garantex. In February 2025, the European Union imposed sanctions on the platform for working with sanctioned banks.

Kyrgyzstan National Stablecoin

Gold stablecoins replace CBDCs

While many countries are developing central bank digital currencies (CBDCs), Kyrgyzstan has chosen a different path. Instead of creating a national digital currency, authorities decided to support a gold-backed stablecoin, USDKG. The project was recently audited by Consensys Diligence, a team known for its work on MetaMask and other blockchain solutions. The audit confirmed the security of USDKG’s smart contracts, bringing it one step closer to full launch.

Why Kyrgyzstan abandoned CBDC?

Unlike countries developing digital currencies (China’s digital yuan, Russia’s digital ruble), Kyrgyzstan is skeptical of CBDCs. The main arguments against: centralized control — the state will have full control over citizens’ transactions; privacy risks — users lose financial independence; limited benefits — state-owned digital currencies do not address volatility. Instead, the authorities support the USDKG token, which is pegged to the price of gold and operates according to the ERC-20 standard. Main advantages: global availability — the asset can be used for international settlements; transparency — the movement of tokens is tracked in the blockchain; stability — historically, gold has retained its value better than many fiat currencies.

The USDKG audit was conducted by Consensys Diligence, a team specializing in blockchain project security. The following were studied during the inspection: Code Correctness – ensuring that the smart contract operates as specified. Security – protection against potential attacks and vulnerabilities. Compliance with project goals – whether the contract is fully functional, including blacklisting, compliance, and other prescribed features. During the analysis, several medium and small vulnerabilities were discovered, which the team quickly fixed: The transferFrom() function did not take blacklists into account, which could allow blocked users to conduct transactions. There was no validation for null owners and compliance addresses, which could lead to management failures. After the fixes, Consensys confirmed the security of the USDKG smart contract, making the project ready for launch.

The USDKG token structure includes: Owners - manage the issuance and destruction of tokens. Compliance team - monitors sanctions lists and freezes assets when necessary. Blacklists are a mechanism to restrict suspicious wallets. Gnosis Safe multi-signature is used for management, which increases the security level. Consensys recommends regular updates to security versions to avoid potential vulnerabilities.

Why Kyrgyzstan is betting on gold

Kyrgyzstan has abundant gold reserves, and converting gold into digital assets can bring economic benefits. Potential benefits: Attracting foreign investment - gold remains a popular tool for preserving capital. Transparency of capital flows - blockchain simplifies control and auditing. Reduced reliance on volatile cryptocurrencies - gold-backed assets are more stable.

What's next?

The USDKG project is about to be officially launched. The authorities are planning integration with banks, financial institutions and, possibly, international investors. However, important questions remain: where and how will the gold backing USDKG be stored? How will liquidity be ensured? How will global regulators react? If the experiment is successful, other countries may follow Kyrgyzstan's lead and launch tokens backed not only by gold, but also by other assets (silver, oil, minerals). The Consensys audit confirms that USDKG is a serious project and not just another experiment. This makes it one of the most interesting examples of CBDC alternatives in the crypto industry.

Russia’s Cryptocurrency Laws and Regulations

Division and consensus at the policy level: compliance, sovereignty, and coordination mechanisms. According to Russia's current legal framework (as of early 2025): The Digital Financial Assets Law (implemented in 2021) officially recognizes "digital financial assets" (DFA) as a legal form of property. Digital assets can be used for investment, but cannot be used to pay for everyday goods and services. However, the draft of the Digital Currency Law (not yet passed), the preliminary version of which allowed individuals and companies to "limited use" of cryptocurrencies, has been shelved for many years due to differences between the central bank and the Ministry of Finance. The Ministry of Finance tends to allow cryptocurrencies to be used for international settlements; the central bank emphasizes risks and tends to prohibit them.

There is an obvious split in the policy discussion - the law lags behind but the practice has already begun, the regulation is uncertain but the companies are already taking action: Russian law currently does not recognize the legal payment status of stablecoins and only allows their use abroad; in practice, a large number of companies are already using cryptocurrencies for cross-border settlement and asset transfer; policy recommendations focus on "classified regulation", that is, distinguishing CBDC, stablecoins and crypto assets, and clarifying their respective boundaries. According to Alexander Shendriuk Zhidkov, deputy chairman of the Budget Committee of the Russian Federation Council, at the exhibition, Russia plans to pilot crypto-financial business in "special administrative regions" such as Kaliningrad and Vladivostok, build a policy sandbox at the local level, allow specific companies or projects to operate under regulatory exemptions, and explore more flexibility.

New Model

The Central Bank of Russia, in accordance with the instructions of the President of Russia, has submitted to the government a proposal on regulating investments in cryptocurrencies (digital currencies). It is proposed to allow a limited range of Russian investors to buy and sell cryptocurrencies. To this end, a three-year special experimental legal regime (ELR) is planned. Only "specially qualified" investors will be able to trade in cryptocurrencies within the ELR. This is a new status, which is expected to be obtained by citizens if their investments in securities and deposits exceed 100 million rubles, or their income in the previous year exceeded 50 million rubles. It is also proposed that investor companies that meet the qualifications under the current legislation become participants in the experiment. For financial institutions that want to invest in cryptocurrencies, the Bank of Russia will develop regulatory requirements based on the risk level and nature of such assets.

The launch of ELR aims to increase transparency in the cryptocurrency market, form standards for service provision, and expand investment opportunities for experienced investors who are ready to take greater risks. The Russian Central Bank has repeatedly pointed out that private cryptocurrencies are not issued or guaranteed by any jurisdiction, are based on mathematical algorithms, and are highly volatile. Therefore, investors must be aware that they are taking the risk of potential loss of funds when deciding to invest in cryptocurrencies.

The Russian Central Bank still does not consider cryptocurrencies as a means of payment, so it proposes to prohibit residents from using cryptocurrencies for transaction settlement outside the EPR and to hold those who violate the ban accountable. Outside the experimental system, it is planned to allow all qualified investors to invest in settled derivatives, securities and digital financial assets, which do not deliver cryptocurrencies to investors, but whose returns are linked to their value.

Russian exporters and importers will be allowed to use cryptocurrencies in cross-border settlements under foreign trade agreements, but only within the Experimental Legal Regime (ELR). In addition, the State Duma has adopted a law allowing the use of foreign digital rights in Russia and the use of Russian digital rights abroad. Among other things, this will expand the mechanisms for using digital rights in foreign trade settlements.

The law also stipulates the procedures and conditions for cryptocurrency mining and introduces the relevant basic terms and definitions. According to the previous mining law that came into effect on 24.11.1, individual entrepreneurs and legal entities registered in the special register of the Federal Tax Service (FTS) can legally carry out mining. Individuals can mine cryptocurrencies without registration, but they must comply with the energy consumption limits set by the regions. Material reference (cbr.ru/press/event)

Cross-border payments and international cooperation

Russia attaches great importance to cooperation with BRICS countries and advocates the establishment of an independent clearing system through cooperation with BRICS countries. Russian officials have made it clear that the BRICS mechanism does not pursue a unified currency like the "BRICS Coin", but promotes multilateral mutual recognition and anchoring between stablecoins and local digital assets of various countries. The goal is to build a regional financial network that does not rely on the US dollar but has circulation capabilities. At the same time, in order to circumvent the cross-border payment restrictions brought about by Western sanctions, Russian companies are establishing legal entities in "friendly countries" such as the UAE, issuing and deploying private chain stablecoins that are only used in specific trade and investment scenarios, bypassing the open market and European and American supervision, and building a more flexible and controllable digital payment network.