From 2024, Russian citizens and individuals residing in Russia are prohibited from owning, controlling, and holding positions in the management bodies of European companies providing crypto wallet, account, and digital asset custody services. The 21st package of EU sanctions, adopted at the end of July, expands these restrictions. Lawyers explained what else will be prohibited regarding Russians and European crypto companies.
What Will Change in EU Rules
From August 25, the existing ban will extend to companies providing any crypto services under the MiCA regulation, including exchanges and trading platforms, said Yuri Brisov, partner at Digital & Analogue Partners. This covers the entire list under the European Market in Crypto Assets (MiCA) regulation: exchange of cryptocurrency for fiat and for other cryptocurrency, order execution and transmission, crypto-asset transfers, token placement, consulting, portfolio management, custody. If previously a Russian could not own a European crypto custodian, by the end of August they will not be able to own any licensed crypto company in the EU or be part of its management.
Owning or controlling, directly or indirectly, companies providing at least one of the above-mentioned services is prohibited for Russian citizens and residents—any individuals actually permanently residing in Russian territory, regardless of their passport, explained Maria Nefedova, consultant at IPN Partners. She clarified that the prohibition also covers holding any positions in the management bodies of such companies, if the company is established under the law of an EU member state, and the term "management body" typically includes the board of directors, supervisory board, executive board, and any other statutory body of the company vested with powers of management and supervision.
"This concerns not only the position of director, but in general any position granting the right to make decisions or control the company's activities. The wording 'own or control' can also be interpreted broadly—it formally covers not only cases of direct shareholding, but also indirect ownership through a chain of companies or exercising de facto control of a company without share ownership," says Nefedova.
Also, according to her, a ban is introduced for EU companies to enter into transactions, directly or indirectly, with companies and platforms providing crypto-asset services, if they are established in "certain" third countries. This refers to countries that the EU Council recognizes as systematically not preventing the use of platforms to circumvent sanctions. A specific list of such countries has not yet been approved and will be formed by a separate Council decision as relevant jurisdictions are identified, the lawyer clarified.
Who the New EU Restrictions Apply To
The EU states that the new measures primarily aim to combat sanctions circumvention through third countries, where, according to the EU Council, the activity of Russian banks and other players in the cryptocurrency market is gradually shifting, Nefedova said. Therefore, the new prohibitions are divided into several blocks.
The first concerns personal participation: Russian citizens and individuals actually residing in Russia are prohibited from owning shares, controlling, or holding posts in the management bodies of European crypto companies. The second block concerns business itself: European operators will be prohibited from entering into transactions with crypto companies and platforms registered in those third countries that will eventually be included in the sanctions list of "problematic" jurisdictions, the expert explained.
Brisov emphasized that, since not only direct but also indirect ownership and control are prohibited, hiding a share behind a holding company or nominee will not work. He also added that parallel norms have been introduced for citizens and residents of Belarus.
"The practical burden also falls on the European crypto companies themselves. Transaction screening does not detect such violations, so companies will have to check corporate registers, beneficial owner data, and the composition of boards of directors," said Brisov.
What Exceptions Are Provided Under the New Prohibitions
The prohibition does not apply to citizens of EU, EEA countries and Switzerland, nor to individuals with temporary or permanent residence permits in these countries: a Russian with a Cyprus passport or a Portuguese residence permit is not subject to the restriction, says Brisov. He also noted that the European Commission recognizes long-term national visas, such as study, work, or humanitarian visas, as legal residence, but this depends on the specific country's law. No special industry-specific exceptions or transitional permissions for owners without European status are provided, the expert added.
There is another exception concerning EU citizens, said Nefedova. If a citizen of an EU member state permanently resided in a country that later ends up on the EU's list of "problematic" jurisdictions, and had resided there before the date of that country's inclusion in the list, the ban on transactions with local crypto platforms does not apply to them. Most likely, the date of inclusion of a specific country in the list will be explicitly stated in the annex itself, and the EU citizen will have to document the fact of residence there before that date, for example, with a residence permit, registration, or a document on tax residency in that country, the expert explained.
How the New Rules Will Affect Russian Owners and Top Managers of European Crypto Companies
From August 25, individuals not covered by exceptions who own shares in European crypto companies of any profile must cease ownership or control in such a company, says Nefedova. In turn, top managers and board members who are Russian citizens or residents also cannot hold positions in the management bodies of such companies.
A direct mechanism for a gradual exit for this category of persons is not provided. According to the expert, it is assumed that the prohibition is unconditional and requires complete cessation of participation and holding of positions by the specified date. Thus, companies will have to conduct a pre-emptive check of the ownership structure and composition of management bodies to identify all beneficial owners and officials falling under "Russian citizen" or "resident in Russia," including cases of indirect ownership through a chain of companies, explained Nefedova.
"Formally, the ban targets the Russian individual, not the company as an EU legal entity, so direct responsibility lies with them. But in practice, banks, payment systems, and company partners usually also check the composition of shareholders and the board of directors, so the fact of having a Russian beneficial owner or top manager can lead to refusal of service or contracts with the company itself," warned the lawyer.
Brisov reminded that Russians have one week left and three options for action: sell the share, exit management bodies, or confirm European status. The expert explained that those who did not manage to do so within a month of the sanctions package adoption will exit the capital on worse terms: buyers are few, and time works against the seller.
For an individual, a violation means sanctions liability, which in most EU countries is criminal, said Brisov. According to him, for a company, a Russian shareholder or director without European status becomes a direct threat to the MiCA license: regulators assess the suitability of owners and management body members, and a sanctioned status of a participant will not pass this assessment.
"The EU's logic is consistent: first, Russians were denied access to European crypto infrastructure as clients, then as counterparties, now as owners and managers," said the expert.
end-content
