Chainalysis, a US blockchain analytics firm, published a new research study on Wednesday showing that Eastern Europe is the fifth-largest cryptocurrency market, with $630.9 billion worth received on-chain. the region between July 2021 and June 2022. The figure represents more than 10% of global transaction activity during the time period studied.

Eastern Europe, the eastern part of Europe, is home to countries like Belarus, Bulgaria, the Czech Republic, Hungary, Moldova, Poland, Romania, Slovakia, Ukraine, and Russia.

According to the study, the most important news in the region has been the Russian invasion of Ukraine. The war has affected all aspects of life in the two nations and cryptocurrencies are no exception.

Research shows that both Russia and Ukraine have witnessed a spike in crypto activities after the war began on February 24. Ukraine saw an increase in cryptocurrency transfers through donations for national support and assistance programs. On the other hand, the crypto activity of Russian users was affected by the restrictions imposed on them by various services in response to the invasion.

As a result, crypto activity deemed “high risk” or “illicit” has increased in Eastern Europe, and especially in Russia.

The report showed that 18.2% of all crypto transactions in Eastern Europe are connected with risky or illicit activities. Some of such risky activity in the region comes from interaction with high-risk crypto exchanges, which typically do not require users to submit know-your-customer (KYC) information.

According to the study, trade restrictions fueled the use of cryptocurrencies for licit and illicit purposes, as users, especially Russians, adopted cryptocurrencies to circumvent sanctions.

Difficult situations have forced Russian citizens to use lesser-known exchanges after various EU sanctions prevented them from accessing European crypto services. The data associates high-risk activity with anything from online gambling to high-risk exchanges to decentralized finance (DeFi) protocols. Stablecoins are becoming the preferred medium of exchange for this use case as they do not see the price volatility of assets like Bitcoin.

The increase in risky activities was expected as a way for users to maintain their livelihood. Last month, Russia made a U-turn and agreed to legalize cryptocurrencies to facilitate international trade amid the deepening impact of sanctions introduced in response to the war in Ukraine.

On September 5, the Bank of Russia and the country’s Ministry of Finance acknowledged the need to legalize the use of cryptocurrencies in cross-border deals. The two government bodies agreed that it was impossible to continue without enabling cryptocurrencies as a legal payment method to evade US and other economic sanctions.

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