Inside the EU’s new country-level crypto ban — Here’s why HTX and 13 platforms were targeted

The European Union (EU) has widened its sanctions targeting Russia by banning Justin Sun-owned HTX and 13 other crypto platforms.

The platforms span the United Arab Emirates (UAE), Panama, Georgia, the Marshall Islands, Kyrgyzstan and Belarus. They include BitPapa, A7 networks and more.

According to the EU Council, these platforms have acted as conduits for blocked Russian entities to move funds and bypass existing sanctions. The transaction ban prohibits EU persons and firms from doing business with these crypto platforms. 

In particular, Justin Sun-owned HTX’s appearance on the sanctioned list is very noteworthy. The exchange was banned by the U.K in May.

To counter possible freezing of funds, HTX moved its reserves to an unknown third party and has been switching hot wallets, making it difficult to conduct sanction screening. 

However, the EU’s aggressive action to ban crypto services in a third country could exert more pressure and signal an evolution of crypto in sanction enforcement. 

What EU crackdown means for crypto industry

Russia resorted to crypto for oil exports and other international trade after being sanctioned and subsequently removed from SWIFT. It fast-tracked its crypto regulatory framework during this period.

Crypto’s touted non-sovereign status made it a popular alternative to move funds for most sanctioned countries. In fact, Venezuela and Iran also went the same crypto route to bypass Western sanctions. 

However, the EU’s new ability to ban offshore platforms, a third country, or even cut off an entire regional bloc, will likely become an effective regulatory pressure. According to Chainalysis,

For the crypto industry, this package signals a shift in how regulators view platforms’ role in sanctions enforcement.

The firm added,

Platforms that fail to prevent sanctioned entities from using their services are now targets themselves, and the third-country ban mechanism means entire jurisdictions could be cut off from European markets if they host platforms facilitating evasion.

For the EU, the country-level ban is the new and most effective tool to deal with crypto-based sanctions evasion. 

It’s a strong deterrent to countries hosting platforms that help Russia evade EU sanctions.

Here, it’s worth noting that the U.S froze over $1B of crypto funds tied to Iran, as part of the tools to end the ongoing West Asia crisis. It also sanctioned several local crypto firms and their leadership.

In a nutshell, crypto is no longer a loophole or paradise for sanctioned entities and alleged criminal players. In fact, it is increasingly becoming a crucial chokepoint to aggressively implement sanctions. 

Final Summary

• EU has extended the transaction ban across 14 crypto exchanges in a new move that could block an entire country for aiding sanctions evasion.
• Analysts believe this is a new regulatory risk for crypto platforms and host countries with weak sanctions screening.