Tether has frozen $27 million worth of USDT linked to the Russian cryptocurrency exchange Garantex, in response to the latest European Union sanctions targeting financial networks tied to Russia’s war efforts in Ukraine.‍

The EU’s 16th package of sanctions includes measures against Garantex, a Moscow-based crypto exchange accused of facilitating illicit financial flows. European officials seek to prevent cryptocurrencies from being used to evade sanctions or fund activities supporting Russia’s economy.

Garantex responded to the asset freeze through its Telegram channel, stating that more than 2.5 billion rubles ($27 million) in USDT had been blocked. The exchange has suspended all operations, including crypto withdrawals, while attempting to resolve the issue.

Garantex has been under scrutiny from regulators for years. In April 2022, the US Treasury’s Office of Foreign Assets Control (OFAC) sanctioned the exchange for allegedly facilitating transactions linked to illicit activities. The latest EU sanctions align with Washington’s efforts to restrict access to global financial networks.

A statement from the EU Council describes Garantex as being closely linked to Russian banks already facing sanctions. Authorities allege that the exchange has been used to bypass financial restrictions, enabling Russian entities to conduct international transactions despite economic barriers.

The EU has directly sanctioned a cryptocurrency exchange for the first time, signaling an expansion of its financial restrictions. These latest sanctions also include 35 entities and 48 individuals, covering industries such as defense manufacturing, oil transportation, and financial institutions with links to sanctioned networks.

Restrictions on shadow fleet operations have also been strengthened. Three companies involved in transporting Russian crude oil, a key source of revenue for Moscow, have been blacklisted as part of efforts to close loopholes in global financial sanctions.

Tether’s decision to freeze assets associated with Garantex raises concerns about the security of stablecoins held by Russian-linked exchanges. Previous freezes by Tether targeted funds tied to criminal activity, but this case highlights stablecoins being directly affected by geopolitical sanctions.

With increased scrutiny on Russian exchanges, crypto traders may seek alternative platforms or explore decentralized finance (DeFi) solutions to move funds. However, financial regulators across multiple jurisdictions are tightening controls to prevent cryptocurrencies from being used to bypass sanctions, limiting the options available to blacklisted entities