The EU has given itself the power to block crypto transactions with an entire country if regulators there repeatedly fail to stop platforms from helping Russia evade sanctions. The move accompanies fresh transaction bans on 14 foreign crypto platforms and tighter rules on Russian and Belarusian ownership of EU crypto firms.
The Council of the European Union adopted the measures on July 23 as part of its 21st sanctions package against Russia. Under amended Article 5bc of Regulation (EU) No 833/2014, the EU can now prohibit its operators from dealing with crypto-asset service providers established in a third country, provided the Council finds that country has systematically and persistently failed to prevent crypto platforms from helping evade EU restrictions.
No country has yet been placed on that list, according to economic sanctions specialist Nick Turner, so the provision currently exists as a legal mechanism rather than an active ban on any jurisdiction.
Fourteen platforms hit with direct bans
Before any country-wide restriction takes effect, the package has already imposed transaction bans on 14 crypto-related service platforms operating outside the EU. The Council identified Georgia, Panama, the United Arab Emirates, the Marshall Islands, Kyrgyzstan and Belarus as the jurisdictions hosting the affected platforms, barring EU operators from conducting covered transactions with them.
The package also added four designations tied to Russia's cross-border A7 payments network, including entities linked to operations in Africa. EU officials said the network forms part of the financial infrastructure Russia has used to maintain payment channels despite restrictions imposed since its invasion of Ukraine. The crypto measures sat within a much larger action covering 218 individual listings, including 48 people and 170 entities, plus asset freezes on 94 banks and financial institutions.
Turner calls the rule a shift toward secondary sanctions
Turner described the country-level mechanism as an important change in the EU's approach to secondary sanctions, which pressure entities outside the bloc over their dealings with sanctioned parties. According to Turner: "a country's regulators are on the hook for failing to stop EU-sanctioned activity", he wrote in a July 24 analysis.
Turner said the rule could create legal conflicts where domestic laws permit activity that EU sanctions require local authorities to prevent. He added it was uncertain whether the EU would ultimately place a country on the list, since a nationwide designation would affect providers beyond the individual platforms accused of facilitating restricted transactions. European Commission President Ursula von der Leyen had said in June that country-level restrictions would serve as a deterrent for jurisdictions hosting platforms that help Russia evade EU sanctions.
Ownership rules tighten as MiCA authorizations lag
From Aug. 25, the prohibition on Russian and Belarusian ownership, control and management positions will extend across crypto-asset services covered by the Markets in Crypto-Assets Regulation, including advice, portfolio management and customer transfers — beyond the wallet, account and custody providers it previously covered. Separate July measures already bar Belarusian nationals and residents from owning or controlling MiCA-regulated firms from the same date.
The restrictions land shortly after MiCA's final EU-wide transition period expired on July 1. An Aug. 11 analysis citing TRM Labs found that only 281 of 1,343 identified crypto service providers across the European Economic Area had secured authorization by the deadline, leaving 1,062 without approval. TRM found unauthorized providers sent about $5 billion directly to sanctioned counterparties, roughly three times the $1.7 billion attributed to authorized firms, while 12% of unauthorized providers carried High or Severe risk ratings compared with 2% of authorized businesses.
Source: crypto.news
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