The United States imposed sanctions against the crypto exchange Garantex, stating that it “deliberately ignored” anti-money laundering and countering the financing of terrorism (AML, CFT) obligations and “allowed” attackers to abuse its “systems”. The joint efforts of Washington and Berlin have also led to the shutdown of darknet servers in Germany, while the Central Bank of Russia says it still opposes cryptocurrency adoption.
In a white paper, the U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) wrote that an analysis of “Garantex’s known transactions indicates that more than $100 million worth of transactions are associated with illicit darknet entities and markets.”
The exchange previously worked with a Russian oligarch Alexander Lebedev and until recently was registered by the Estonian regulator.
“In February 2022, Garantex lost its license to provide virtual currency services after oversight by the Estonian Financial Intelligence Service revealed serious AML/CFT deficiencies and found links between Garantex and wallets used for criminal activities.”
This figure, according to OFAC, includes “nearly $6 million” from the Russian ransomware “Conti gang”.
The agency also added that “approximately $2.6 million was received from Hydra Market.” And Hydra, described in the release as “the largest and most famous darknet marketplace in the world,” became the subject of a joint operation that also involved the German authorities.
OFAC wrote that the German Federal Criminal Police “shutdown Hydra servers in Germany and seized bitcoin (BTC) worth $25 million.”
Hydra also came under sanctions.
Treasury Secretary Janet Yellen said:
“Our actions today are sending a signal to criminals that you cannot hide on the dark web or their forums, and you cannot hide in Russia or anywhere else in the world. In coordination with allies and partners such as Germany and Estonia, we will continue to disrupt these networks.”
Meanwhile, on Twitter, Secretary of State Anthony Blinken wrote that the United States has sanctioned “the world’s largest dark web marketplace for Russian speakers” at Hydra, and that the move “demonstrates our commitment to continue destroying infrastructure and ransomware actors.”
According to the data CoinPaprika, Garantex’s 24-hour turnover is just over US$11 million, and its official headquarters are officially listed as Estonia, although the firm is known to have several offices in Russia. It offers pairs with ruble and hryvnia.
Meanwhile, the Central Bank is still refusing to change its hardline stance on cryptocurrency adoption. Calls for Moscow to legalize cryptocurrencies and give industrial miners business rights have been growing louder since the beginning of the year, and they have been reinforced by the war in Ukraine.
A broad political consensus supports regulation of the sector, but the bank prefers to talk about banning both cryptocurrency trading and mining.
According to RIA News, the bank does not give up, despite the direct challenge of the deputy from the United Russia party Anton Gorelkin. The latter is also Deputy Chairman of the State Duma Committee on Information Policy.
The publication quotes the first deputy chairman of the Central Bank, Ksenia Yudaeva, who answered the deputy that “massive acquisition of cryptocurrencies by citizens” will inevitably lead to “their use as a means of payment.”
“In this case, the ruble as the monetary unit of the Russian Federation will be replaced by cryptocurrencies. The black market will expand and tax revenues will fall. This will reduce the stability of the financial sector.”
She added that the drive to introduce cryptocurrencies “into the financial system” will lead to “the creation of a parallel financial system that does not obey the rules applicable to financial institutions in Russia.”
Gorelkin wrote to the bank after the latest round of meetings of the Cryptocurrency Working Group, a joint group of the government, the Central Bank and the private sector. Last month, the MP stated that 12% of Russians had experience with crypto “transactions” in one form or another.