Sanctions have long been one of the main enforcement tools of the “rules-based international order” – the post-Second World War system of international norms and institutions designed to maintain global stability.
Their effectiveness depends largely on control over the global financial infrastructure. As most international transactions pass through regulated institutions, authorities are able to freeze assets, block payments and restrict access to markets.
Digital assets challenge this model. With transactions taking place outside parts of the traditional financial system, cryptocurrency has created new routes around the financial chokepoints where sanctions were typically enforced.
Crime, punishment and evasion: How Russia forged new routes
Following the invasion of Ukraine in 2022, Western governments applied unprecedented restrictions on Russian banks, state entities and individuals.
Its financial institutions were cut off from the SWIFT system, assets were frozen, and export controls tightened.
As a result, Russian businesses began exploring cryptocurrency as an alternative channel for cross-border payments, allowing funds to move outside parts of the Western-controlled financial system.
By July 2024, the Duma – Russia’s parliament – had passed legislation permitting the use of cryptocurrencies in international settlements, effectively allowing crypto for sanctions evasion.
The following month, President Vladimir Putin announced the legalisation of cryptocurrency mining, creating a domestic source of digital assets that could potentially be used in international trade.
Last year, Russia introduced the rouble-backed A7A5 stablecoin, which has been used for transactions totalling more than $93.3 billion.
Stablecoins – cryptocurrency whose value is tied to a traditional currency – now account for 84% of funds moved in illicit cryptocurrency transactions, according to blockchain analytics company Chainalysis.
The EU is now seeking to ban all crypto activity with Russia, in a bid to crack down on Moscow using assets outside the traditional banking system to evade sanctions.
The scale of the problem: Transactions surge among sanctioned states and groups
The value of cryptocurrency transactions linked to sanctioned entities soared by nearly 700 per cent in 2025, Chainalysis’ yearly Crypto Crime Report revealed in February.
Iranian proxy networks had used cryptocurrency for over $2 billion of money laundering, illicit oil sales and arms procurement in recent years, it noted.
Groups such as Hezbollah, Hamas and the Houthis were using cryptocurrency at “scales never before observed”, the report stated.
Stolen cryptocurrency remained a major threat in 2025, with hackers linked to North Korea alone stealing around $2 billion during the year.
Much of this was driven by a handful of large-scale attacks, including the Bybit hack, which saw nearly $1.5 billion stolen in the largest crypto theft on record.
Although North Korean cyber groups have long been active in the sector, the past year was their most destructive yet, both in terms of the amounts stolen and the sophistication of the attacks and laundering tactics.
The compliance challenge for UK businesses
For UK companies dealing with digital assets – including exchanges, fintech platforms and financial institutions – this changing landscape creates new regulatory exposure.
Under the UK sanctions regime, businesses must ensure they do not:
- Make funds or economic resources available to sanctioned individuals or entities
- Facilitate transactions that could amount to sanctions evasion
- Fail to conduct adequate due diligence on customers and counterparties
Crypto transactions present particular compliance challenges because they may involve pseudonymous wallets, cross-border flows and decentralised infrastructure.
Robust anti-money laundering and sanctions screening procedures are essential, including the use of blockchain analytics tools to monitor transactions and conduct enhanced due diligence on higher-risk countries.
How Lewis Nedas can help
As scrutiny of digital assets and sanctions enforcement increases, businesses and individuals face growing legal risk. Lewis Nedas Law is widely regarded as one of the pre-eminent firms in this field, advising and representing clients in financial crime matters including sanctions, anti-money-laundering obligations and regulatory investigations.
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