The United Kingdom is punishing a ruble-backed stablecoin issuer and the HTX digital asset exchange for assisting Russia’s efforts to evade economic sanctions imposed following the 2022 invasion of Ukraine.
On May 26, the U.K. government’s Foreign, Commonwealth & Development Office issued a new round of measures targeting individuals and entities helping Russia evade economic sanctions imposed on the country following its invasion of Ukraine.
Among the entities on the U.K.’s hit list are “the Kremlin-backed A7 network, which actively exploits Kyrgyzstan’s financial systems to channel funds into Russia’s war economy.” This network “claimed to have moved more than $90 billion last year—equivalent to roughly half of Russia’s yearly military expenditure” and nearly one-fifth of the country’s total foreign trade transactions.
U.K. Foreign Secretary Yvette Cooper warned that “if the Kremlin thinks it can evade our sanctions by hiding behind crypto networks and shadow financial systems, it is gravely mistaken.”
The A7 network’s vehicle for moving Russian money is the ruble-backed A7A5 stablecoin, which launched in early 2025 and quickly supplanted the sanctions-evading role previously played by Tether’s USDT stablecoin. A7 is partially owned by Russia’s state-owned/military-focused Promsvyazbank (PSB), and A7A5 was the first token to be granted digital financial asset status by the Kremlin.
The A7 network has been targeted by numerous rounds of sanctions, including the European Union’s recent action against the Kyrgyzstan-based parent company of the Meer digital asset exchange, “where significant amounts of the government-backed stablecoin A7A5 are traded.”
The EU, U.K., and the United States have all targeted other exchanges on which large volumes of A7A5 are routed, including Kyrgyzstan-based Grinex, a rebranded version of Garantex, which was taken offline last year by an international law enforcement effort. In April, Grinex claimed to have been hit by “a “large-scale cyberattack with indications of involvement by foreign intelligence agencies” that resulted in the loss of $13 million “belonging to Russian users.”
The U.K.’s new sanctions target Garantex co-founder Sergey Mendeleev, A7 execs Igor Gorin and Irini Akopian, and Israeli national Liran Cohen. Also on the hit list are three “Georgian companies operating Russia-focused exchanges seeking to evade sanctions,” Rapira Group, ARVIX LLC, and Aifory. All three had been flagged by the National Bank of Georgia last September as operating without local permission, although no action appears to have been taken by Georgian authorities at the time.
The El Salvador-registered/Russia-serving ABCeX platform was also targeted, alongside Alistera Limited, Bitpapa IC FZC LLC, EXMO Exchange Limited, and OJSC Virtual Assets Issuer (the entity behind the Kyrgyz state-backed gold-backed/dollar-denominated stablecoin USDKG).
Earlier this month, A7 exec Oleg Ogienko told CoinDesk that the A7A5 stablecoin “has a good chance to stay competitive even after the sanctions are lifted. If you trade with Russia, you need convenient and fast means of settlement.”
Ogienko also claimed that A7A5 is attracting individuals looking to earn big returns via its 13.5% interest rate, which, due to Russia’s inflationary war economy, is just one point below the country’s benchmark interest rate. However, cross-border payments remain A7A5’s primary use case.
Since Tether is now honoring U.S. law enforcement requests to freeze tokens linked to illicit activities, A7A5 could end up playing a pivotal role in Iran’s plans to monetize access to the Strait of Hormuz.
Justin Sun doth protest too much
The U.K.’s actions mark the first time it has applied Regulation 17A of its 2019 sanctions framework to crypto exchanges. This prohibits financial institutions from serving as correspondent banks or processing payments for the sanctioned entities. These restrictions apply even if the transactions are between accounts not under sanctions but are downstream from a sanctioned account (or appear headed to one).
U.K. financial institutions and virtual asset service providers are also required to freeze assets linked to sanctioned entities/individuals. This could prove a major development given that the new sanctions put a bullseye on HTX, the Justin Sun-affiliated exchange previously known as Huobi.
The official statement justifying this designation cites “reasonable grounds to suspect that HUOBI GLOBAL SA is or has been involved in obtaining a benefit from or supporting the Government of Russia by providing financial services, or making available funds, economic resources, goods or technology, to a person, namely A7 LIMITED LIABILITY COMPANY, which is carrying on business in a sector of strategic significance to the Government of Russia.”
The U.K. also has reasonable grounds to suspect that Huobi has been “providing financial services, or making available funds, economic resources, goods or technology, to a person, namely GARANTEX Europe OU.” The U.K. claims HTX/Huobi may have “channelled over $1.5 billion back into the Kremlin’s hands.”
HTX’s response said the U.K. sanctions “arrived today without prior notice or any supporting evidence shared with us.” While reassuring customers that “all user funds are safe,” HTX tried to claim that Huobi Global “is distinct from the online HTX exchange,” a claim undermined by Huobi’s legal filings that say it “owns and operates HTX.” Regardless, HTX insisted that it would “work with relevant UK authorities to understand the basis for the action and to address any concerns promptly.”
An HTX spokesperson told CoinDesk that “A7A5 was trying to list their stablecoin. However, following our rigorous internal due diligence and compliance review processes, their application was explicitly rejected.”
Ogienko supported this claim, saying A7 had “approached all the leading [centralized exchanges] several months ago” seeking A7A5 listings, “but all of them rejected our application almost at once because they are scared of secondary sanctions.” Ogienko further claimed that A7 didn’t need any exchange to list their stablecoin “because our business model runs on DeFi [decentralized finance] infrastructure.”
Sun’s response to the news consisted of offering his standard denial of HTX/Huobi ownership, professing his belief in its “full compliance with all applicable laws” and expressing confidence that the U.K.’s concerns will be promptly addressed.
SoFi claims US stablecoin first, Block’s Cash App rolls out USDC access
In less salacious stablecoin developments, the U.S. national chartered bank SoFi Technologies announced Wednesday that its SoFiUSD stablecoin is now available on its app. The San Francico-based SoFi says customers can buy, sell, hold and convert SoFiUSD, marking “the first time that a U.S. national bank-issued stablecoin is available directly on a banking app.”
SoFi CEO Anthony Noto said the launch meant “people no longer have to choose between blockchain technology and regulated banking products.” SoFiUSD has been released on the Ethereum and Solana networks and the company expects to launch on additional networks soon.
SoFi said “the coming weeks” will see SofiUSD launch on Bullish Global (NASDAQ: BLSH), the company’s first centralized exchange partner, “to provide seamless trading for institutional clients.” SoFi members will soon be able to convert SoFiUSD into interest-bearing tokenized deposits that will be eligible for Federal Deposit Insurance Corporation (FDIC) coverage.
SoFi will also permit “24/7/365” cross-border transfers of SoFiUSD. In March, SoFi partnered with Mastercard (NASDAQ: MA) to offer SoFiUSD as a settlement option on the credit card giant’s global payments network.
Meanwhile, Jack Dorsey’s digital payments firm Block (NASDAQ: XYZ) has made good on its pledge to offer stablecoin access to users of its Cash App service. Cash App said it now supports transfers of the USDC stablecoin issued by Circle (NASDAQ: CRCL) to/from four networks: Ethereum, Solana, Polygon, and Arbitrum.
Cash App will limit customers to sending $2,000 worth of stablecoins in any one day, with a $5,000 maximum on outgoing transfers per week. There doesn’t appear to be any limit on how much stablecoin value you can receive on a daily basis, so long as the weekly total stays under $10,000. These limits are separate from customers’ BTC limits. The stablecoin options aren’t available for New York state residents
Cash App won’t display a separate stablecoin balance in customers’ accounts, as the app will covertly convert USDC to cash and back on behalf of customers. For the time being, stablecoin transactions are fee-free.
Block announced its stablecoin plans last November, despite the wishes of BTC maximalist Dorsey, who expressed dismay at the move due to the centralized control of fiat-backed tokens. But Dorsey acknowledged that Cash App “customers want to use” stablecoins, and the customer is always right, so…
Block’s Bitcoin Product Lead Miles Suter tweeted Wednesday that the company remains “singularly focused on bitcoin becoming the native currency of the internet.” Suter called stablecoins “upgraded fiat” that will “upgrade the financial infrastructure that Cash App is already built on” and “get people comfortable moving money on internet-native rails. And once people are on open rails, bitcoin is a step away.”
We don’t know how to break it to Suter, but basically, nobody is using BTC to pay for things, probably due to its high transaction fees and slow settlement times. Still, he’s got high hopes…
Europe’s bankers not buying what stablecoin backers are selling
Across the pond, the European Central Bank (ECB) continues to resist recommendations to loosen regulatory restrictions that crypto backers claim are limiting the appeal of euro-backed stablecoins.
The latest recommendations came from the Bruegel think tank in a paper titled A new strategy to contain stablecoin risks in the European Union. The paper warned that EU policymakers’ current preference for tokenized deposits over euro-based stablecoins risks the latter ceding the stage to their dollar-backed counterparts, which currently account for 99.76% of all fiat-backed tokens.
Among the paper’s recommendations are “dispensing” with the current requirement under the EU’s Markets in Crypto-Assets Regulation (MiCA) for ‘systemic’ (aka major) stablecoin issuers to hold 60% of their fiat reserves in cash in EU banks.
The paper also suggests allowing stablecoin issuers to “remunerate stablecoin holders directly,” provided the rate offered is below standard deposit rates. Bruegel also wants EU-regulated issuers to have “access to the ECB’s balance sheet, including to lending-in-last-resort facilities.”
The European Commission recently launched a public consultation on MiCA’s rules that could address some of these concerns. But Reuters reported that the ECB warned European Union finance ministers that Bruegel’s recommendations would “make bank deposits more fickle, weakening an economically vital sector and the central bank’s ability to engineer interest rates.”
ECB president Christine Lagarde voiced similar concerns prior to the Bruegel paper’s release, acknowledging the possibilities that blockchain tech had to offer but suggesting the potential negatives of wider stablecoin implementation outweigh their potential benefits.
The Bruegel paper’s authors reportedly gave a presentation to “an informal gathering of EU finance policymakers” on May 22. They got a “mixed” reaction, with the strongest pushback coming at the suggestion that the ECB serve as a financial backstop for stablecoin issuers.
Bank of England (BoE) Governor Andrew Bailey recently went on record with his concerns that America’s looser stablecoin rules could lead to ‘bank runs’ on U.K. financial institutions by foreign stablecoin holders due to the higher cash reserves envisioned by the U.K.’s proposed stablecoin rules. (The UK will require 40% of stablecoin reserves to be held in ‘unremunerated’ BoE cash accounts, but this figure could be revised in future regulatory drafts.)
Seven ways to win (or lose)
On May 21, the European Credit Research Institute (ECRI) issued a paper that compares and contrasts stablecoin regulations in seven major jurisdictions: the EU, U.S., U.K., Hong Kong, Singapore, Japan, and the United Arab Emirates.
The ECRI looked at four aspects of stablecoin regulation: how jurisdictions treat foreign-issued tokens; what assets are accepted as stablecoin reserves; whether to anchor stablecoins within existing regulations or create bespoke rules; and what jurisdictions permit and prohibit within their borders.
We encourage you to read the whole document, but we’ll briefly summarize the paper’s recommendations.
First, echoing the BoE’s concerns regarding the need for international stablecoin standards, ECRI believes “an architecture of mutual recognition” (aka accepting foreign-issued stablecoins alongside locally-issued tokens) is possible without countries having to choose between “full insulation and unrestricted openness.”
Two-tier approaches—like the U.K.’s plan to restrict domestic payments to U.K.-issued sterling-backed stablecoins while permitting the use of other stablecoins for cross-border transfers—will “address the risks regulators care about in a targeted way, preserve the global fungibility on which the principal use cases depend, and create a meaningful incentive to local issuance without resort to exclusion.”
Second, regarding fiat reserves, the ECRI notes that none of the seven markets treat the issue the same, and while that remains their right, “regulators should articulate their reserve-composition choices as the redistributive decisions they are,” not simply as “technical prudential rules.”
Also, research by international financial bodies such as the Bank for International Settlements (BIS), the Financial Stability Board (FSB), and the International Monetary Fund (IMF) should study the international consequences of these divergent reserve regimes and identify “trade-offs that no single jurisdiction can clearly see from its own vantage.”
Third, a global choice must be made on the ‘yield’ issue to determine “what kind of financial instrument a stablecoin should be.” If stablecoins are cash, then no yield is warranted. But if stablecoins are closer to shares in money market funds, “then yield is the natural compensation for using capital and the prohibition becomes a regulatory choice that requires justification.”
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