EU Can Now Block Entire Countries From Crypto Ties to Russia

The European Union has given itself the power to cut off entire national crypto markets, not just individual firms, if those countries help Russia dodge sanctions.

The 21st sanctions package against Russia, passed July 23, includes a provision that lets the EU block all transactions with crypto service providers or exchange platforms in any third country the bloc deems complicit in Russian sanctions evasion. The list of targeted nations is currently empty, but the mechanism is live.

Article 5bc of amended Regulation 833/2014 states the EU “shall be prohibited to engage, directly or indirectly, in any transaction with a legal person, entity or body that is an entity providing crypto-asset services or is a platform enabling the exchange or transfer of crypto-assets and is established in a third country.” The list, the regulation says, “shall include only third countries that have been identified by the Council as having systematically and persistently failed to prevent the provision of crypto-asset services, or to prevent platforms exchanging or transferring crypto-assets.”

For Nick Turner, an economic sanctions expert, this shift means the EU is leaning into secondary sanctions after having a long history of opposing them. He also stressed that this might cause legal conflicts in jurisdictions where regulation conflicts with EU sanctions.

“Under the new Article 5bc, a country’s regulators are on the hook for failing to stop EU-sanctioned activity, regardless of the country’s own laws,” he said. Turner believes this measure will be used for diplomatic leverage at first, calling it “hard to say” if any country would be hit directly.

The package also added four designations related to the A7 Russian ruble stablecoin network, which the U.K. government targeted in May. The new EU provisions sever its links with Africa-based institutions and add transaction bans to 14 crypto service platforms in Georgia, Panama, the UAE, the Marshall Islands, Kyrgyzstan, and Belarus.

A second new provision, effective August 25, extends a ban on Russians and Belarusians owning, controlling, or holding positions in EU-based crypto service providers. The restriction, first included in January 2024, now covers any crypto-asset service described in the Markets in Crypto Assets (MiCA) regulations – advisory, portfolio management, and transfer services on behalf of customers.

The 21st package follows the 19th round, which also targeted crypto use for sanctions circumvention. The EU has steadily widened the net as Russia's war economy relies more on alternative payment channels.