EU targets ruble-backed stablecoin A7A5 in new sanctions push

The European Union is moving to impose sanctions on A7A5, a ruble-backed stablecoin tied to sanctioned Russian actors, according to internal documents allegedly reviewed by Bloomberg.

The proposal would block any direct or indirect transactions between EU-based entities and the token. It would also hit several banks in Russia, Belarus, and Central Asia that have been facilitating crypto-related payments linked to Moscow.

Officials have said that all 27 member states must approve the plan before it takes effect. As of press time, A7A5, A7, and Promsvyazbank (PSB) have not answered emailed requests for comment.

A7A5 was developed by A7, a cross-border payments company owned by Moldovan fugitive banker Ilan Shor and the Russian state-owned lender PSB. Both entities are already under Western restrictions.

According to regulatory records, Shor and his subsidiaries built channels for Russian businesses to keep making international payments disrupted by U.S. sanctions, often through arrangements with Russian crypto exchange Garantex, also sanctioned.

PSB was blacklisted by the UK, EU, and U.S. in 2022 after Russia’s invasion of Ukraine. Garantex, which helped set up A7A5, was sanctioned that same year, while A7 itself was sanctioned earlier this year.

EU blocks engagement with A7A5-linked networks

Elliptic data shows there were 41.6 billion A7A5 tokens in circulation worth $496 million on September 26. The total volume of transactions hit $68 billion by that date.

Issued in Kyrgyzstan, A7A5 has become the largest non-U.S. dollar stablecoin globally with a market cap of about $500 million, capturing 43% of the $1.2 billion non-dollar stablecoin market, according to CoinMarketCap and DefiLlama.

On its Telegram channel, the project said it had “proven that a national digital currency can be not only an alternative to the dollar but also a driver of global change.” The token drew scrutiny at the Token2049 conference in Singapore, where its presence triggered questions about sanctions compliance and cross-border oversight.

Launched in February, A7A5 was described as being “backed by a diversified portfolio of fiat deposits held in reliable banks within Kyrgyzstan’s network.” It is pegged 1:1 to the Russian ruble and offers daily passive income equal to half of the interest on those deposits.

Initially issued on Ethereum and Tron, it was promoted as a cross-chain digital ruble for regional trade. Soon after launch, blockchain investigators linked it to Grinex, a crypto exchange called the successor to the sanctioned Garantex.

In mid-August, the U.S. Treasury announced new sanctions against Garantex and related entities, identifying Ilan Shor as the owner of A7A5’s issuer, PSB, already under heavy U.S. restrictions.

Shor runs A7 with PSB to skirt sanctions

The United Kingdom has also imposed restrictions on several Kyrgyz banks, citing evidence that Russia used A7A5 to bypass Western financial measures.

Both London and Washington said the token was part of Moscow’s network for avoiding dollar-denominated payment systems. Officials from the European Commission have refused to comment on the sanctions proposal until it is formally adopted.

Ilan Shor, 37, is a former Moldovan politician wanted for what authorities call “the theft of the century,” a $1 billion fraud about a decade ago. Public regulatory filings show he set up intermediary companies with sanctioned partners to enable Russian businesses to keep conducting foreign trade disrupted by U.S. restrictions.

Russian firms, facing months-long delays for cross-border payments, have turned to these intermediaries to settle deals within five working days, according to one company website tied to Shor. This contrasts sharply with the multi-month waits some Russian companies now face.

Shor and PSB, which is Russia’s main lender for its military-industrial sector and under some of the harshest U.S. sanctions, launched A7 to facilitate cross-border payments. Founding documents from September show Shor holding a 51% stake and PSB holding 49%.

A business partner in one of Shor’s ventures, who asked not to be named, confirmed his co-ownership of A7. The firm advertises settlement “with any country and in any currency within five working days,” offering a channel for Russian-linked money flows.

This infrastructure, combined with A7A5’s surge to the top of the non-dollar stablecoin market, is what prompted the EU to prepare its latest sanctions push.

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