- The UK announced sweeping sanctions targeting crypto exchanges like HTX, using a powerful banking rule (Regulation 17A) for the first time on digital assets.
- This prohibits UK institutions from any payment processing where a designated exchange appears in the transaction chain, forcing deep on-chain tracing.
- The action also targets the A7 network and entities linked to Russian sanctions evasion, including the Gold-backed stablecoin USDKG.
The United Kingdom announced one of its most expansive cryptoasset-focused sanctions packages to date today. The action dramatically expands compliance obligations for UK virtual asset service providers by applying a key banking regulation to crypto exchanges for the first time.
The UK has applied Regulation 17A of the Russia sanctions to cryptoasset exchanges, a powerful tool historically used against designated banks. Consequently, UK firms are now barred from correspondent relationships with these exchanges and must stop processing any payments where designated entities appear in the transaction chain. This change forces compliance teams to trace funds across multiple on-chain hops, not just screen direct counterparties.
Several major cryptoasset exchanges were designated, reflecting the breadth of infrastructure servicing Russian users. The largest is HTX (Huobi Global S.A.), which is suspected of providing services to the sanctioned A7 network and Garantex. Other designated platforms include Bitpapa, which was sanctioned by the US in March 2024, and the issuer of the Kyrgyz state-backed USDKG stablecoin.
A significant component of the package focuses on exposing the A7 network, a central player in sanctions circumvention. The UK designated both individuals and corporate entities at its core, including OJSC State Brokerage Company and Diamond Estate LLC. This action targets the ecosystem behind ruble-denominated stablecoin activity.
This precedent marks a meaningful shift in how financial sanctions translate to the digital asset space. Treating designated exchanges as functional equivalents of designated banks closes a gap exploited by bad actors for years. Other jurisdictions are likely watching this regulatory model for pursuing offshore venues used for illicit finance.
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