Crypto’s rise in sanctioned nations grows, but last Friday’s US$1.6bn heist reveals serious regulatory, state-sponsored and cyber vigilance gaps: upcoming report

Cryptocurrency is carving out a significant role as an alternative financial system, especially in countries sidelined by international sanctions, according to insights from a yet-to-be released report on crypto crime.

As digital currencies gain widespread acceptance, they are increasingly serving as a workaround for nations disconnected from global banking networks. Russia stands out as a key example, having recently enacted laws to allow international payments in cryptocurrencies. This legislative shift complements its efforts to conduct trade settlements in local currencies with economic giants such as China and India, sidestepping Western-dominated financial channels.

The upcoming report highlights how this trend is driven by necessity. Sanctions, intensified since 2022, have barred Russia from systems such as SWIFT, pushing the country towards alternative solutions. Cryptocurrency offers a decentralized alternative, enabling cross-border transactions without intermediaries — a lifeline for economies under pressure.

Beyond Russia, other heavily sanctioned jurisdictions are likely exploring similar paths, signaling a broader shift in how digital assets are reshaping global finance. A preview of the report notes that current developments poses a complex dilemma for regulators worldwide: While cryptocurrency enhances financial access for underserved regions, it also risks enabling illicit activities if left unchecked. The report will stress the need for a balanced approach to preserve the legitimacy of these systems. Enhanced oversight, industry collaboration, and advanced blockchain analytics are seen as critical to preventing misuse by rogue actors or states. (See the latest news on the US$1.6bn Bybit cypto heist that illustrates the gravity of the situation).

According to Chengyi Ong, Head of Policy (Asia Pacific), Chainalysis, the firm that has been compiling its data insights for the upcoming report of crypto crime: “With the mainstream adoption of cryptocurrency, we are seeing more use cases of it serving as an alternative set of financial rails… A combination of regulatory oversight, industry-wide cooperation, and advanced blockchain analytics tools can ensure that cryptocurrency remains a viable and legitimate financial system while eliminating channels for illicit actors and states.”