How global sanctions are reshaping illicit activities in cryptocurrency

The world of cryptocurrency has undergone a notable transformation due to the expansion of global sanctions. New data reveals significant changes in how illicit financial transactions are conducted, particularly regarding the involvement of state-sponsored entities and the rise of crypto tokens linked to national currencies. This article explores these trends and their implications for the cryptocurrency ecosystem.

Rise in Illicit Cryptocurrency Activity

A report from Chainalysis indicates that illicit cryptocurrency activities surged in 2025, attributed not to a sudden spike in everyday crypto crime but a structural shift in how states and sanctioned entities move money. As global financial restrictions intensified, blockchain networks emerged as alternative channels for cross-border transfers, proving more challenging to block or monitor through traditional systems.

According to Chainalysis, illicit entities received at least $154 billion in 2025, marking a staggering 162% increase from $59 billion in 2024. Much of this growth can be traced to licensed actors moving funds on-chain at unprecedented scales. Despite this rapid expansion, illicit activity still comprises less than 1% of the total cryptocurrency transactions, highlighting how sanctions influence blockchain utilization in unprecedented ways.

Impact of Sanctions on Chain Activity

2025 has been characterized as a turning point by Chainalysis, showcasing unprecedented activity linked to nation-state behavior. Unlike previous eras dominated by hacks, scams, and darknet markets, recent activities display higher levels of coordination and technical sophistication. This trend reflects an increasing familiarity with blockchain tools among sanctioned entities facing restricted access to the global banking system.

The scale of global sanctions has risen dramatically, with the Global Sanction Inflation Index estimating that nearly 80,000 individuals and entities are currently under sanctions as of May. A separate study from the Center for a New American Security revealed that the U.S. added 3,135 entries to its Specially Designated Nationals and Blocked Persons list in 2024, the highest annual total on record. This expanding sanctions landscape has heightened incentives for seeking alternative settlement systems.

The Emergence of State-Backed Tokens

One significant contributor to the surge in illicit cryptocurrency flows has been Russia, which has faced substantial international sanctions since its invasion of Ukraine. In February 2025, Russia launched a digital token backed by the ruble, known as A7A5. Chainalysis reports that this token processed over $93.3 billion in transactions within a year. The use of a state-backed token illustrates how sanctioned governments are experimenting with blockchain-based instruments to maintain commercial and financial connectivity.

This approach marks a shift from previous uses of cryptocurrencies, where states were largely indirect beneficiaries of illicit networks rather than active participants in token-based systems.

Stablecoins Take Center Stage

Throughout 2025, stablecoins have emerged as the dominant players in illicit cryptocurrency activities, accounting for 84% of the total volume of illegal transactions. Chainalysis attributes this trend to their price stability, high liquidity, and ease of cross-border transfer. These same characteristics that support legitimate payments and remittances have made stablecoins appealing to sanctioned users seeking predictable settlements.

The growing reliance on stablecoins signals a shift away from volatile assets for illicit transfers. The focus has transitioned from speculative trading to efficiency, reliability, and scale, particularly for high-value transactions involving sanctioned entities.

Criminal Activity Remains a Smaller Fraction

Despite record illicit volumes, Chainalysis has emphasized that criminal activity still represents a small fraction of the broader cryptocurrency economy. Overall on-chain activity has seen considerable growth over the past year, keeping illicit transactions below 1% of total volume, although their absolute value has skyrocketed. Other forms of crypto-related crime have persisted alongside sanctioned flows, with cybersecurity firm PeckShield documenting over 20 major exploits in December alone, including address poisoning scams and private key leaks resulting in losses of tens of millions of dollars.