In brief
With its recent EU Russia sanctions packages, the EU has increasingly targeted crypto-assets to minimise the risk of circumvention of EU Russia sanctions through crypto-assets. Regulation (EU) No 833/2014 (“EU Russia Sanctions Regulation”) now provides for restrictions with respect to the provision of certain crypto-asset services to Russian entities as well as for restrictions with respect to certain listed crypto-assets, crypto platforms, and other participants in the crypto-asset transaction chain.
In this Client Alert, we highlight the key restrictions that financial service companies must comply with in the context of transactions involving crypto-assets.
Restrictions applying to banks acting as crypto-asset service providers
The EU Russia Sanctions Regulation provides for a number of restrictions applying with respect to the provision of crypto-asset services. Such crypto-asset services include custody and administration of crypto-assets on behalf of clients, trading and exchange services, placing and execution as well as reception and transmission of orders, advice and portfolio management services, and transfer services for crypto-assets, cf. Art. 3(1) No. 16 Regulation (EU) 2023/1114 (MiCAR).
Moreover, as of 25 August 2026, CASPs incorporated in the European Union are prohibited from allowing Russian nationals or natural persons residing in Russia to directly or indirectly own or control, or hold any posts in their governing bodies, cf. Art. 5b(2a) EU Russia Sanctions Regulation.
Restrictions applying to certain crypto-assets
The EU Russia Sanctions Regulation also provides for comprehensive restrictions with respect to certain crypto-assets listed in Annex LIII. These restrictions apply regardless of the nationality of the other entities involved in the specific transaction and currently cover the crypto-assets A7A5, a stablecoin issued by the sanctioned Russian state-owned bank Promsvyazbank, as well as RUBx, a stablecoin launched by the Russian state-owned defence and technology conglomerate Rostec.
In particular, financial service providers are prohibited from engaging, directly or indirectly, in any transaction involving such crypto-assets under Art. 5ba Alt. 1 EU Russia Sanctions Regulation. This means that financial service providers may not directly or indirectly participate in, facilitate or execute transactions involving the relevant crypto-assets, including by purchasing or selling such assets, executing client orders, providing brokerage or exchange services, transferring crypto-assets between wallet addresses, settling crypto-asset transactions, or otherwise acting as an intermediary in connection with a crypto-asset transaction.
Moreover, under Art. 5ba Alt. 2 EU Russia Sanctions Regulation, financial service providers are prohibited from providing any support to the development of these crypto-assets. This extensive restriction requires financial service providers to refrain from all activities relating to the development of the relevant crypto-assets, including by acting as issuer, arranging or financing their issuance, providing operational infrastructure, managing reserve assets, or supplying advisory, technical or other services that contribute to the functioning or broader adoption of the relevant crypto-asset ecosystem.
Prospectively, further crypto-assets may be listed in Annex LIII to the EU Russia Sanctions Regulation as well as Annex XXXIV to the Council Regulation (EC) No 765/2006 (“EU Belarus Sanctions Regulation”) which provides for corresponding restrictions in its Art. 1ze.
Restrictions applying to transactions with other CASP
In addition, the EU Russia Sanctions Regulation also provides for restrictions relating to transactions with other CASPs.
In particular, Art. 5ad EU Russia Sanctions Regulation prohibits direct and indirect transactions with certain CASPs listed in Annex XLV. The CASPs listed in Annex XLV have been identified by the European Union as (i) providing crypto-asset services or payment services frustrating the purpose of the EU Russia sanctions regime, (ii) supporting Russia’s war of aggression against Ukraine, (iii) frustrating certain prohibitions of the EU Russia Sanctions Regulation itself, or (iv) enabling the performance of international transactions frustrating the purpose of the EU Russia Sanctions Regulation. Listed entities include African, Chinese and Kyrgyzstani financial service providers.
In addition, Art. 5bb EU Russia Sanctions Regulation prohibits all direct or indirect transactions with Russia-based CASPs and crypto-asset exchange or transfer platforms. Pursuant to Art. 1zf EU Belarus Sanctions Regulation, financial service providers are also prohibited from engaging, directly or indirectly, in transactions with CASPs or crypto-asset exchange or transfer platforms established in Belarus.
Prospectively, the Council may also extend this prohibition to CASPs, crypto-asset exchange or transfer platforms based in third countries. Pursuant to Art. 5bc EU Russia Sanctions Regulation, the Council may list third countries in Annex LVII that have been identified as having systematically and persistently failed to prevent the provision of crypto-asset services, or to prevent platforms exchanging or transferring crypto-assets, in frustration of the provisions of the EU Russia sanctions regime. While no country has been included in Annex LVII to date, this mechanism allows the European Union to target a large number of entities by listing a single country.
Liability risks
Financial service providers failing to comply with these restrictions are exposed to considerable enforcement and liability risks.
Under German law, an intentional infringement of EU sanctions provisions relating to transactions involving crypto-assets, including the provision of crypto-wallet addresses, may constitute a criminal offence under Section 18(1) No. 1 lit. c) of the German Foreign Trade and Payments Act (Außenwirtschaftsgesetz, AWG). Such criminal offence may be punishable by imprisonment for a term of three months to five years. Negligent breaches of such restrictions may qualify as an administrative offence under Section 19(1) No. 1 AWG and lead to fines of up to EUR 500,000.
In addition, financial service providers may face substantial corporate fines which, depending on the circumstances of the individual case, may amount to up to EUR 40 million.
Next steps
In light of the increased regulatory requirements as well as the increased scrutiny by the national competent authorities, financial service providers offering crypto-asset-related services should apply particular care when designing and adapting their sanctions compliance framework.
In particular, financial service providers should:
- Carefully assess their exposure to EU sanctions regimes;
- Closely monitor the designations under the EU sanctions regimes;
- Expand their sanctions screening processes going beyond customers and wallet addresses to platforms, CASPs and other intermediaries involved in a transaction;
- Assess indirect exposure by reviewing transaction-routing structures and other arrangements that may conceal a link to sanctioned crypto platforms or Russian counterparties;
- Enhance due diligence on involved counterparties; and
- Adapt their formal compliance and screening processes accordingly.
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Sebastian Dey, Senior Counsel, has contributed to this legal update.