Crypto coin for Russian shadow payments moves $9bn
The A7A5 token aims to facilitate financial flows disrupted after Ukraine war
A new cryptocurrency token designed to allow cross-border payments in spite of western sanctions on Russia, launched by a fugitive Moldovan oligarch and a Russian defence sector bank, has moved some $9.3bn on a dedicated crypto exchange in just four months since it was launched, the FT has found.
Billed as the first stablecoin pegged to the Russian rouble, the A7A5 token was officially launched in Kyrgyzstan in February and aims to facilitate large-scale financial flows into and out of Russia, which have been severely complicated by western restrictions.
An FT analysis of wallets linked to Grinex, a crypto exchange also founded very recently in Kyrgyzstan and trading only in A7A5, roubles, and a dollar-pegged stablecoin, shows a total of $9.3bn worth of A7A5 being moved to and from wallets linked to that exchange.
The stablecoin says it is backed by rouble deposits in Moscow’s Promsvyazbank, a defence sector bank subject to US, UK and EU sanctions over Vladimir Putin’s full-scale invasion of Ukraine. The coin’s rapid growth is clear: it now has 12bn tokens in circulation, equivalent to $156mn, and is used intensively by a relatively small group of users, whose daily transfers routinely amount to several times that volume.
But the A7A5 token also appears to be linked to Moscow’s attempts to use cryptocurrencies to bankroll political influence campaigns abroad, according to a new report by the Centre for Information Resilience (CIR), a London-based non-profit research group.
A7, the company initially behind the token, now subject to British sanctions, is majority-owned by Moldovan businessman Ilan Șor, Russian corporate records show. Șor fled from house arrest in Moldova in 2019 after he was convicted of stealing $1bn in the largest bank fraud in the country’s history.
Șor moved to Moscow, and became a Russian citizen. Last year he was accused by Moldovan police of running a vast vote-buying operation in Moldovan elections, accusations he described as an “absurd spectacle”.
In its new report, CIR found multiple domains used in political influence operations in Moldova shared an IP address with A7 and A7A5 sites. Șor did not respond to a request for comment. In a statement, A7A5 said that while it “co-operated with the technical team of A7 at the early stage”, it “decided to separate completely due to different visions of development strategy” last month.
The stablecoin’s creation comes amid increased scrutiny of Russia-linked transactions for sanctions compliance and the exclusion of some Russian banks from the Swift international messaging network.
“Russian business figures and government officials have been talking for a while about how they might use cryptocurrency to evade sanctions in a large-scale way, particularly by creating their own stablecoin,” Elise Thomas, senior investigator at CIR, said.
Kyrgyzstan was chosen because it is “friendly jurisdiction that is not so subject to sanctions”, A7A5’s director Leonid Shumakov has said. “It is no secret that this jurisdiction is currently helping a lot to cope with the pressure [Russia] is under.”
Russian users can buy A7A5 tokens on the Tron or Ethereum blockchains and then use them to purchase Tether’s USDT, a US-dollar pegged stablecoin. From there, the user can withdraw the value in whichever country or currency they need.
Shumakov said A7A5’s goal was to give “people the opportunity to use it as a bridge for a safe transition” to USDT, adding that many current A7A5 holders were likely to be Russian importers.
According to the company, a rouble is deposited in Promsvyazbank for every one used to purchase A7A5 — protecting the client in Russia from the volatility of traditional cryptocurrencies. The company states that the existence of those fiat reserves is verified by an independent Kyrgyz auditor.
A7A5 and Grinex appear to have emerged and grown in the wake of the collapse of another major Russian shadow payments system.
Garantex, Russia’s largest crypto exchange, was taken down by US law enforcement in March. Tether co-operated and froze $23mn worth of USDT held in Garantex wallets.
Garantex described Tether’s move as a declaration of “war against the Russian crypto market”. It rushed to invite customers to come for face-to-face meetings in its Moscow office to discuss recovering frozen assets.
For Russian officials, Tether’s decision underscored the need to create a homegrown stablecoin. “Recent developments . . . lead us to think that we need to look at creating domestic instruments like USDT,” said Osman Kabaloev, a Russian finance ministry deputy.
CIR’s Thomas said that “if you have a stablecoin that is controlled by an entity that is based in the west . . . you could lose your money”, while if the asset is based in Russia or a friendly country, the investment is safer.
Garantex was a major conduit for cash. The exchange has handled over $60bn worth of transactions since April 2022 and was used by Russian elites as well as in global criminal money laundering schemes, according to Elliptic, a blockchain analysis company whose data was used by US law enforcement in the operation.
In the weeks preceding the crackdown, however, a large amount of funds held in USDT on Garantex were moved into A7A5, according to Swiss blockchain research company Global Ledger. The two were already close: footage shared on social media from Garantex’s office shows an A7A5 logo on one of the booths.
Some $29mn worth of A7A5 tokens were then shifted on to Grinex, a newly founded exchange in Kyrgyzstan.
Grinex, analysts say, appears likely to be an heir to the platform taken down by the US action. In its investigation, CIR found that Grinex and the issuer of A7A5 were both registered in Kyrgyzstan the same week.
“Garantex users with outstanding balances at the time it was shut down could have these balances credited to new accounts set up on Grinex,” said Tom Robinson, chief scientist and founder of Elliptic. “It is therefore clear that Grinex is a direct successor to Garantex, and highly likely to be operated and controlled by the same parties.”
Grinex told the FT it is an independent platform, unrelated to Garantex. “All claims of ‘continuity’ or ‘rebranding’ are speculative and not supported by the facts,” it said.
“Grinex capitalised on market opportunities after the closure of Garantex as part of its growth strategy,” a representative said. “Grinex obtained a portion of the non-toxic customer base of the blocked Garantex exchange, committing only to users with a transparent history.”
The company also said that Grinex and A7A5 were independent entities, and that the “coincidence of registration dates and peaks in activity does not indicate any affiliation” between them.
The listing of the stablecoin on the exchange was due to user interest, it said. “Amid increasingly frequent blockages by Tether, Russian-speaking customers need a reliable alternative to USDT.”
Grinex, it added, complies “with international sanctions regimes and does not conduct transactions with jurisdictions or individuals subject to restrictions”. It also contested the FT’s calculations.
An FT analysis of open source blockchain data found 124 wallets have transferred a combined $9.3bn worth of A7A5 to and from wallets that have been linked to Grinex. The true value of the transactions represented by these token movements is unclear: a large portion of the flows follow rigid fixed patterns which suggest they may be being used as part of an internal banking process.
“It seems highly likely that A7A5 exists for use by a relatively small number of services and actors at present,” an Elliptic note said.
It is not possible to confirm whether those actors are linked to Russia. However, an FT analysis of the transactions shows that they occur almost entirely on weekdays, often during Moscow office hours.
In a statement to the FT, A7A5 said it was “created as a response to the crypto community’s growing interest in stablecoins denominated in currencies other than the US dollar”.
“We see this as a real market opportunity,” it said.
Asked about connections to Garantex and the new Kyrgyz exchange, the issuer said: “The token was distributed through licensed brokers listed on the official website. Listings on individual trading floors took place on their own initiative or on the brokers’ initiative.”
A7 was added to the UK’s sanctions list in May. Speaking at a forum last week, Șor said that A7 was creating a larger, differentiated and “sufficiently invulnerable” new payments system. It would involve exchanging securities and “non-politicised” instruments like precious metals in order to avoid regulators. Crypto would be just one track, he said.
CIR found job adverts by A7 for Chinese speakers, energy experts and accountants in the United Arab Emirates, Kyrgyzstan and Russian-occupied Ukrainian regions.
Last year, Șor was involved in discussions with Keremet Bank in Kyrgyzstan, according to the US Office of Foreign Assets Control, as parts of plans “to create a sanctions evasion hub for Russia to pay for imports and receive payment for exports”. Ofac sanctioned the bank in January.
A7A5 did not respond to any questions from the FT about Keremet Bank, or about Șor and his activities in Moldova.
