Cryptocurrency Theft Causes Financial Loss of Over $10 Billion for Ukraine, According to RUSI Report

In a recent report published by the Royal United Services Institute (RUSI), Ukraine is suggested to potentially recover at least $10 billion in stolen funds and lost tax revenue through a more comprehensive cryptocurrency regulation framework. However, the organization that published the report was not explicitly mentioned in the provided search results.

The report comes at a critical time, as Ukraine is obligated to harmonize its virtual asset rules with EU standards by late 2025 as part of its EU accession process. Ukraine's emerging status as an hub for laundering crypto funds, due to its strategic location, wartime vulnerabilities, and evolving regulations, has raised concerns.

The report warns that without swift action, Ukraine risks further erosion of its finances and security due to over-the-counter (OTC) activities, its role as a threat hub, and the role of cryptocurrency in funding procurement of sanctioned components for the Russian military.

In July, Ukraine took action against several Russian-linked crypto entities, including 19 Russian crypto miners, 17 digital asset operators, 5 exchanges, and other firms tied to Russia's financial infrastructure.

Experts also warn about the prevalence of money-mule networks, known locally as "drops," in Ukraine. These networks drain an estimated $24 million from Ukraine's budget each month, with banks shutting down 80,000 mule accounts last year.

The pattern of Russian actors taking advantage of neighbouring countries to launder crypto funds has also been seen in Kyrgyzstan. In response, the UK and US have announced sanctions against local crypto networks linked to the rouble-pegged stablecoin A7A5 and two local exchanges in Kyrgyzstan.

However, the report does not provide details on the nature or scale of the drug trafficking operations in Ukraine or Kyrgyzstan, nor does it specify the impact of the sanctions on the crypto networks in these countries.

The report urges Ukraine to narrow its focus, attract specific assets such as stablecoins, recognise the overlap between cybercrime and illicit finance, and set clear regulatory rules. Attempts to regulate cryptocurrency in Ukraine began in 2018, with the parliament adopting the Law on Virtual Assets in February 2022, but the law has yet to take effect due to the need for a separate taxation bill.

The report does not mention any specific action taken by Kyrgyzstan against Russian-linked crypto firms, nor does it provide details on the response from the governments of the US or UK to the Kyrgyz president's appeal, accusing the US and UK of politicizing the country's economy.

In conclusion, the RUSI report highlights the need for urgent action in addressing the issue of cryptocurrency regulation and money laundering in Ukraine and Kyrgyzstan. The reports findings underscore the importance of harmonizing virtual asset rules with EU standards, setting clear regulatory rules, and recognising the overlap between cybercrime and illicit finance in these countries.

Cryptocurrency Theft Causes Financial Loss of Over $10 Billion for Ukraine, According to RUSI Report