Can Cryptocurrency Be Used to Bypass International Sanctions?
Crypto flows to sanctioned entities surged in 2025, but A7A5 shows both the reach and limits of blockchain-based sanctions evasion: transactions may continue onchain even as exchanges, stablecoin issuers and fiat gateways become decisive chokepoints.
Identified cryptocurrency flows to sanctioned entities rose sharply in 2025, raising questions about whether digital currencies can be used to bypass conventional banking restrictions. The issue gained particular attention on October 23, 2026, when Israeli Prime Minister Benjamin Netanyahu discussed preparing for potential international banking sanctions during an interview with Roy Katz on Israel's Channel 10.
According to a Ynet translation, Netanyahu said:
“You have to understand that there could be sanctions, including banking sanctions. You need to prepare an economy that can get around them. And you know what that is. You know about digital currencies, and I'm working on that too. And there are other things.”
Netanyahu said he had requested a plan but provided no further details. Officials in Israel’s economic ministries were unaware of such an initiative, according to Ynet. Separately, the Bank of Israel stated that cryptocurrencies could not be used to circumvent sanctions.
The remarks drew a response from Yair Avidan, former Supervisor of Banks at the Bank of Israel, who addressed the legal limitations of blockchain-based transactions, according to Ynet:
“Blockchain is not a solution for circumventing sanctions. Moving a transaction onto a blockchain network or using a digital token does not make sanctions disappear, does not create an alternative economy, does not override legal prohibitions and does not change the obligations of the parties involved.”
According to TRM Labs' 2026 Crypto Crime Report, cryptocurrency inflows to sanctioned entities and jurisdictions reached approximately $93 billion in 2025, with sanctions-related cryptocurrency activity increasing by more than 400% year-over-year. TRM attributed much of the increase to new sanctions designations and improved identification of cryptocurrency addresses associated with sanctioned entities, rather than necessarily reflecting an equivalent increase in sanctions evasion.
Chainalysis reported a similar trend in The 2026 Crypto Crime Report, estimating that sanctioned entities received $104 billion in cryptocurrency in 2025, an increase of 694% from the previous year. Both Chainalysis and TRM identified an increase in sanctions-related cryptocurrency activity, though they used different methodologies. Chainalysis attributed the rise primarily to state-driven evasion, while TRM emphasized new designations and improved attribution.
According to TRM, nearly 95% of cryptocurrency inflows to sanctioned entities and jurisdictions involved stablecoins, primarily Tether's USDT and the Russian ruble-pegged A7A5 stablecoin. A7A5 alone accounted for approximately $72 billion in activity during 2025, although TRM noted not all of this volume represents sanctions evasion.
Launched in January 2025, A7A5 offered an alternative to dollar-backed stablecoins such as USDT, whose issuer, Tether, can freeze tokens held at specific addresses, according to blockchain analytics firm Elliptic.
On March 6, 2025, the U.S. Secret Service, working with German and Finnish law enforcement, seized Garantex's web domain and froze more than $26 million in cryptocurrency.
The March enforcement operation did not prevent Garantex from continuing its activities through a successor exchange. According to the U.S. Treasury Department, Garantex used the A7A5 token to transfer customer funds to Grinex. On August 14, 2025, the Treasury's Office of Foreign Assets Control (OFAC) redesignated Garantex and sanctioned Grinex, A7A5 issuer Old Vector, and A7 LLC. On August 20, the United Kingdom sanctioned Grinex and Old Vector, among others, in an action it said also targeted the Meer exchange.
On October 23, 2025, the European Union adopted its 19th sanctions package against Russia over its ongoing war in Ukraine, prohibiting transactions involving A7A5 and imposing sanctions on companies involved in its issuance, development, and trading.
Elliptic described the effect as follows:
“On paper, this changes nothing about the token itself. The A7A5 smart contracts still run on the Ethereum and Tron blockchains, and no Western government can turn them off. In practice, the sanctions changed everything, because they took effect at the token’s boundaries: the exchanges where A7A5 is converted into other assets, in particular USDT.”
Elliptic also reported that A7A5's average daily transaction volume had declined 96% from its July 2025 peak by June 2026. The firm attributed the decline to several factors, including international sanctions, Russian regulatory restrictions, and reduced access to trading venues.
The A7A5 case suggests that cryptocurrency can circumvent some of the practical barriers created by financial sanctions, but it does not eliminate the legal restrictions or guarantee continued access to the broader financial system.
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