London Expands Sanctions, Applies Bank Rules to Crypto
London on May 26, 2026 announced a sweeping set of penalties aimed at choking off Russia’s access to the global financial system. The package marks a turning point: Britain now treats crypto network like a sanctioned bank, extending bank-style obligations to digital-asset venues under Regulation 17A. This is a clear signal that regulators view parts of the crypto market as essential financial infrastructure that must be cut off from illicit use.
The sanctions target 18 entities and individuals believed to be helping Russia evade Western restrictions, including Huobi (HTX), a high-volume exchange once advised by Justin Sun. UK officials say the move closes loopholes and raises the cost of doing business for platforms linked to sanctioned actors.
The A7 Network Under the Microscope
At the center of the crackdown is the A7 network, described by British authorities as a Kremlin-backed system designed to bypass Western restrictions, finance military procurement, and monetize Russian oil revenue. The government asserts that A7 operates as a parallel financial rail compatible with crypto assets, effectively bypassing traditional gatekeepers like banks and clearinghouses.
A7 was launched in October 2024. Investigators connect its ownership to the Russian state, with the majority stake held by Ilan Shor, an oligarch with a controversial history that regulators say ties him to activities aimed at undermining sanctions. The UK attributes a direct line from A7’s operations to Russia’s broader strategic aims in the era of cryptocurrency-enabled evasion.
- A7 allegedly processed about $90 billion as it expanded over its first 18 months, according to the government’s briefing documents.
- In 2025, Huobi (HTX) reportedly handled roughly $3.3 trillion in trading volume, a figure cited by British authorities to illustrate the scale of major exchanges’ influence on global liquidity.
The sanctions pack also extends to a Kyrgyzstan-linked stablecoin issuer, among others, as UK officials argue that these entities played a role in moving value across sanctioned borders. The package uses a tool previously limited to sanctioned banks, signaling a widening view of what counts as critical financial infrastructure in the crypto era.
Industry observers say the move changes the risk calculus for crypto platforms operating in or with the UK. By treating crypto network like regulated banks, the UK is effectively forcing firms to freeze funds, sever correspondent relationships, and disclose holdings linked to sanctioned actors. The regulation, if enforced with vigor, could shrink the on-ramp and off-ramp options for sanctioned traffic, increasing cost and due diligence requirements for exchanges and wallets.
Analysts caution that this creates a tighter web of compliance for digital-asset businesses in Europe and the Commonwealth, potentially pushing transactional activity toward jurisdictions with looser regimes. Still, supporters argue the framework reduces the chance that crypto networks become lifelines for illicit finance, especially when linked to state actors attempting to bypass sanctions.
"This is a watershed moment for how the state treats digital rails that resemble traditional financial infrastructure," said Elena Novak, senior analyst at the Crypto Regulation Forum. "It reduces ambiguity about what counts as sanctioned activity and makes enforcement more straightforward in a rapidly evolving market."
"The problem isn’t just about a single exchange; it’s about the ecosystem those networks rely on. The UK policy treats crypto network like a regulated utility, which could reshape cross-border settlement dynamics," added Marcus Chen, a policy advisor at Global Finance Watch.
Conversely, some market participants warn of unintended consequences. "If a large chunk of liquidity is forced into opaque channels to avoid scrutiny, investors could face higher risk and less transparency," said Sophie Delgado, head of risk research at a major asset manager. "Regulatory clarity must keep pace with technical complexity."
- Regulators are elevating crypto networks to the level of traditional financial infrastructure, with legal tools that compel freezes and relations cuts similar to those imposed on banks.
- Sanctioned entities face immediate operational constraints, potentially reducing liquidity and increasing settlement risk in related markets.
- Market participants should expect enhanced due diligence, stricter sanctions screening, and higher compliance costs for exchanges, wallets, and payment rails linked to sanctioned actors.
British authorities say the enforcement pathway is clear: banks, payment processors, and now crypto venues must cooperate or face penalties. The government will likely roll out additional guidance on how Regulation 17A applies to digital-asset ecosystems, with ongoing oversight of A7 and its network of counterparties.
For traders and investors, the key near-term questions are whether liquidity will shift away from crypto platforms tied to sanctioned activity, how quickly UK-facing services adapt to the new rules, and what global ripple effects emerge as other jurisdictions consider similar steps. The evolving stance signals that, in a crowded regulatory calendar, the UK intends to tighten grip on all forms of cross-border value transfer that touch Russian-aligned channels.
- The UK is explicitly expanding bank-like sanctions to crypto exchanges, crossing a threshold in how regulators view crypto networks.
- A7 is identified as a Kremlin-linked system built to bypass sanctions, with billions in transaction flow attributed to its network.
- Market watchers should monitor liquidity shifts and compliance costs as more jurisdictions contemplate similar measures.
As policymakers weigh the balance between financial integrity and market freedom, the phrase that keeps coming back is a simple one: the rules are changing, and the crypto market will have to adapt fast to stay compliant and liquid.
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