European authorities keep lowering the boom on Russia’s sanctions-dodging stablecoin and the HTX exchange that helps keep it moving.
On July 23, the Council of the European Union announced the adoption of its 21st package of “restrictive measures” aka economic sanctions against Russia for its 2022 invasion of Ukraine. EU Foreign Affairs Council chair Kaja Kallas noted that the latest package, which takes effect on August 23, targeted “over a hundred banks and crypto operators,” including some very familiar crypto faces.
The EU added four more designations related to the A7 network, the Kyrgyzstan-based/Russia-backed force behind the A7A5 ruble-backed stablecoin. Since its launch last year, A7A5 has supplanted Tether’s USDT stablecoin as Vladimir Putin’s primary crypto vehicle for dodging Western sanctions.
The newly targeted entities include Russia-based A7 Agent LLC and Limited Liability Company A71, as well as A7 Africa and A7 Nigeria. The latter two feature prominently in A7’s recent geographic expansion into African markets, which extends to Madagascar, Togo, and Zimbabwe.
The EU previously targeted the Kyrgyzstan-based Meer exchange for allowing “significant” trading volume of A7A5, and the authorities are now widening this net. The list of “credit and financial institutions and entities providing crypto-assets services or payment services established outside of the [EU] that are significantly frustrating” European sanctions efforts includes:
- ‘Rapira
- Aifory Pro (Sooty Ltd)
- ABCeX (Nueva Cryptologia S.A.S. DE C.V.)
- WhiteBird
- NoOnecrypto INC.
- Tradex (Brightum LLC)
- Monease Ltd
- BitPapa
- Exnode, Exnode Pay (Arvix)
- HTX (HUOBI GLOBAL SA)
- EXMO Ltd
- Chinggis Khaan Bank
- Sberbank India
- India VTB
- PilotFinance Ltd
Other targeted crypto-adjacent entities include nearly two-dozen financial institutions “active in the pilot project for operations with real digital roubles launched by the Central Bank of Russia.”
The new sanctions also target several crypto-linked individuals, including A7A5 project director Leonid Valdimirovich Shumakov, a Russian national. Shumakov is associated with the previously sanctioned Kyrgyzstan-based Grinex exchange, a major A7A5 trading platform that emerged from the ashes of the defunct Garantex exchange. Shumakov is also linked to A7A5 issuer Old Vector and Russia’s state-owned PSB Bank, an A7 network partner.
PSB deputy chairman Mikhail Dorofeev was similarly flagged for having “implemented major projects of PSB Bank, including expanding the operations of the A7 network within Russia and abroad, specifically to Nigeria and Zimbabwe.”
The EU also floated “the possibility of a full third-country ban for crypto-asset services, as a strong deterrent to countries hosting platforms that help Russia evade EU sanctions. This new instrument will enable the EU to ban any transaction between an EU operator and any crypto provider used by Russia.”
While the EU included only a placeholder where an offending country’s name could be cited, the EU issued a separate order specifically targeting Belarus. The order expands a 2025 prohibition on Belarusian nationals or natural persons residing in Belarus owning/controlling or holding posts in the governing bodies of any EU member state-based entity that provides “crypto-asset wallet, account or custody services.” The new ban adds “any other crypto-asset services” to those already stipulated.
HTX playing digital wallet whack-a-mole with UK authorities
The EU’s latest move follows similar sanctions in May in which the U.K. government’s Foreign, Commonwealth & Development Office targeted both the A7 network and HTX (formerly known as Huobi). Unlike the U.K., the EU’s new sanctions don’t include requirements for member state institutions to freeze assets related to sanctioned entities.
HTX earned the U.K.’s scarlet letter by “providing financial services, or making available funds, economic resources, goods or technology” to both the A7 network and the defunct Garantex exchange (taken offline last year following an international law enforcement operation). U.K. authorities estimated that HTX/Huobi may have “channeled over $1.5 billion back into the Kremlin’s hands” via this alleged support.
Predictably, HTX denied wrongdoing at the time, and even denied ties to Huobi Global, despite the two entities claiming the exact opposite in unrelated court filings. Both HTX and Huobi are linked to Justin Sun, founder of the TRON blockchain on which nearly all A7A5 is issued.
The EU’s latest sanctions were preceded by a new report from blockchain intelligence firm TRM Labs, which found that HTX has been furiously flipping tokens from one digital wallet to another and across networks in a bid to stay one step ahead of compliance officials.
In the seven weeks since the U.K. lowered its ban-hammer, TRM says HTX “began rotating its wallet infrastructure on a rapid cycle,” creating “a continuous moving target for compliance professionals.” Wallets added to a static compliance block list go ‘stale’ quickly, and the token hopscotch keeps “a large share of HTX’s live infrastructure outside any fixed address list at any given moment.”
TRM says HTX is following a pattern familiar “across the illicit-finance ecosystem,” under which “well-resourced sanctioned entities rarely disappear. They adapt.” HTX has been rotating tokens between hot wallets “multiple times per day,” while also shifting “the funding addresses that seed” these wallets between multiple networks, including TRON, Ethereum, the Binance exchange’s BNB Smart Chain, and Solana.
True to form, HTX issued a statement rejecting the TRM report’s findings, calling the wallet-hopping activity “routine, security-driven platform operations common across the industry.” Sun has said nothing about the report or the EU’s targeting of HTX.
TRM’s report is a bit awkward for Sun, given that TRM is part of the T3 Financial Crime Unit (T3 FCU), a crime-fighting/token-freezing initiative established in 2024 whose charter members also include Tether and, er, TRON. T3 FCU soon welcomed additional members (including Binance) into a new group called T3+.
Circle buys patents, seeks South Korean tie-ups
We recently compiled a list detailing how Tether seemingly can’t stop buying stakes in companies, crypto-focused or otherwise. But the company’s biggest stablecoin rival, USDC-issuer Circle (NASDAQ: CRCL), is quietly burnishing its own dealmaking prowess.
For instance, Circle announced Monday that it had acquired “fundamental assets from the IBM (NASDAQ: IBM) blockchain patent portfolio.” The haul comprises “over 680 patent families and nearly 1,000 issued patents worldwide, spanning foundational blockchain technology, banking, financial services, insurance, enterprise infrastructure, supply chain verification, and secure cloud operations.”
Circle didn’t disclose what price it paid for the portfolio, but did say its “expanded IP position” supports its plan to position itself as a fixture of “the internet financial system.” Circle added that it would work with IBM to explore unspecified “additional commercial opportunities.”
Circle says the deal makes it “the leader in blockchain patent holdings in the United States” (although it’s still got a long way to go to catch non-U.S. blockchain-focused intellectual property leaders like the Switzerland-based nChain).
Meanwhile, Circle CEO Jeremy Allaire was in South Korea last week for an ‘invitation-only’ gathering with local firms involved in the stablecoin/payments sector. That meeting appeared to bear immediate fruit, as Circle announced two tie-ups that could significantly enhance its status within the country.
First, Circle signed a memorandum of understanding (MoU) with Kakao (KSE: 035720.KS), a conglomerate with digital payment and social media units that plans to issue its own won-based stablecoin if/when the government ever finishes the necessary legislation.
Circle says it and Kakao will “explore blockchain-based payment infrastructure and digital asset technologies in Korea,” including “opportunities for USDC and Circle’s global payment rails across payments, settlement, and digital asset connectivity.” Kakao said the pair’s focus will include “opportunities related to KRW-based digital assets and tokenized financial services in line with changes in regulatory and market environments.”
Circle simultaneously announced that it is “collaborating” with online payment gateway Toss Bank to similarly explore “stablecoin-based payment opportunities across one of Korea’s most widely used fintech platforms.”
In June, Toss Bank announced a similar MoU with the Solana Foundation, which oversees the Solana network on which the majority of USDC transactions occur. The pair intend to conduct a ‘phased proof of concept’ for international remittances on Solana, evaluate blockchain-based payments/settlements and other financial services involving stablecoins and other tokens.
Meanwhile, Korean tech titan Samsung (NASDAQ: SSNLF) held its latest Galaxy Unpacked event in the U.K. last week, including an update on its digital wallet plans and USDC’s apparent role within it.
Product manager Lee Dinham told the London audience that “Samsung Wallet will expand beyond cash and savings. It will embrace new forms of digital value, including stablecoins.” Dinham said the expansion will make the company “one of the first major mobile brands to bring native stablecoins to a smartphone, enabling fast and trusted digital value transfers.”
While Dinham was coy with details on timing, the visual mock-up of the wallet shown to the audience featured a ‘stablecoin account’ balance measured in USDC. A few days later, a Circle ‘ambassador’ tweeted a screenshot of his Samsung phone showing USDC as “the first (and only) Stablecoin available on Samsung wallet.”
Agentic AI x402 hiccups
Circle is a major proponent of AI agents making payments using the x402 internet-native payment protocol developed by Circle’s USDC partner, the Coinbase (NASDAQ: COIN) exchange. Given USDC’s current role as agentic AI’s token of choice, Circle is not surprisingly a ‘premier’ member of the new x402 Foundation.
However, a new study claims to have identified vulnerabilities that could allow bad actors to exploit the x402 protocol, potentially resulting in “direct financial loss to merchants, theft of facilitator-held assets, unbounded sponsor-paid gas/fees, and disruption of payment services.”
The study (When HTTP 402 Meets the Blockchain: Risks on Emerging x402 Payments), published last week by researchers at Zhejiang University, focuses on third-party facilitators, to which x402 delegates payment proof verification and on-chain settlement. The authors note that, with many independent applications sharing payment infrastructure, “facilitators concentrate trust and validation logic in a single component, increasing the blast radius of failures.”
The authors identified four new attack vectors in the real-world facilitator and server implementations: Free shopping, Asset theft, Service denial, and Gas abuse. The authors say that in January, they “responsibly disclosed all issues to the respective maintainers, who acknowledged our findings and provided mitigations, including Coinbase.”
The microtransaction focus of agentic AI payments might mean that individual transactors might not find themselves out a small fortune should this train go off the rails. But the study suggests greater testing is warranted before the system is deployed on a wide scale.
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