Overview:
Sergey Mendeleev, a prominent figure in Russia’s cryptocurrency scene, has played a central role in the establishment and operation of two key platforms—Garantex and Exved. These platforms have been instrumental in facilitating cross-border payments and crypto transactions, potentially serving as important tools for Russia’s sanctions evasion strategy. Mendeleev’s growing influence in this space, coupled with Russia’s evolving regulatory framework, positions him as a key player in the country’s crypto ecosystem, especially in the wake of mounting Western sanctions.
Read more about Russia’s new crypto regime here.
Background on Sergey Mendeleev:
Sergey Mendeleev, a seasoned entrepreneur in the digital finance sector, co-founded Garantex in late 2019 alongside fellow Russian Stanislav Drugalev. Garantex quickly grew into one of Russia’s most prominent crypto exchanges, facilitating the exchange of rubles for cryptocurrencies, particularly stablecoins like Tether (USDT). The Estonian entity, Garantex Europe OU, was co-owned by Aleksandr Ntifo-Siao, the company’s commercial director.After Drugalev’s suspicious death in 2021, Mendeleev was replaced as a shareholder by Irina Chernyavskaya, who is connected to Pavel Karavatsky, who has ties to Rosneft, a Kremlin-controlled oil company.
Mendeleev also launched Exved, a platform designed to enable cross-border payments for Russian entities using cryptocurrencies, focusing primarily on USDT for international transactions.
Mendeleev’s background in digital banking and fintech, particularly through his role as managing director of Indefibank, has given him deep insights into the financial mechanisms required to operate within Russia’s evolving crypto landscape. Indefibank, a DeFi-centric institution, offers services like yield farming and flash loans and has supported initiatives such as launching ruble-backed stablecoins on the Ethereum blockchain. These initiatives align closely with Russia’s strategic efforts to shift away from reliance on the U.S. dollar and traditional financial systems, which are increasingly inaccessible due to sanctions.
Garantex: A Sanctioned Crypto Exchange
Garantex, the centerpiece of Mendeleev’s crypto ventures, has become synonymous with Russia’s crypto landscape, despite significant regulatory challenges. Founded in 2019, Garantex initially received a crypto license in Estonia through Garantex Europe OÜ. However, this license was revoked in February 2022 due to repeated compliance failures and alleged money laundering activities. The U.S. government sanctioned the platform in April 2022 after discovering that €5 billion had allegedly been laundered through it. The exchange became a target for global financial regulators, highlighting its role in facilitating illicit financial flows and its use by designated actors in Russia and Iran for sanctions evasion.
Despite these challenges, Garantex has remained operational, maintaining deep liquidity across major blockchains and continuing to facilitate transactions for sanctioned individuals and entities. Its ability to operate in a sanctions-heavy environment demonstrates the resilience of Russian crypto platforms in the face of regulatory pressure. Garantex’s importance is likely to grow further as Russia accelerates its use of cryptocurrencies for cross-border payments.
Exved: Cross-Border Payments with USDT
Mendeleev’s second major venture, Exved, was created to fill a critical gap in Russia’s financial system—facilitating cross-border payments using cryptocurrencies. Exved leverages the Tether (USDT) stablecoin to allow Russian businesses to conduct international transactions without relying on traditional financial systems, which Western sanctions have heavily restricted.
Read more about Mendeleev and the Exved project.
Exved’s ability to facilitate legal transactions for Russian entities aligns with Russia’s broader strategy of utilizing cryptocurrencies to bypass sanctions and reduce dependency on the U.S. dollar. The platform has become especially valuable in sectors like energy, where traditional payment routes have been significantly disrupted. Exved also works closely with Indefibank, further integrating crypto solutions into Russia’s financial infrastructure.
Russia’s Crypto Pivot: Strategic Context
Russia’s evolving regulatory approach toward cryptocurrencies has set the stage for platforms like Garantex and Exved to play an even larger role in the country’s economy. The August 2024 legislation legalizing crypto mining and cross-border payments highlights the strategic importance that Russia now places on crypto technologies.
Mendeleev’s ventures directly align with this shift. Both Garantex and Exved can facilitate the exchange of rubles for cryptocurrencies, enabling sanctioned individuals and businesses to evade financial restrictions. This ability to bypass the traditional financial system presents a growing compliance risk for Western financial institutions.
Russia’s Central Bank (CBR), which once opposed cryptocurrencies, is now pushing forward with infrastructure to incorporate crypto into its financial system for international trade. While Russia continues to ban domestic crypto payments, the focus on international transactions presents significant risks for global compliance efforts.
The Role of Sanctions in Expanding Russian Crypto Influence
Hypothesis: Western sanctions could unintentionally accelerate the development of Russia’s cryptocurrency sector, offering long-term international advantages for Russian players like Mendeleev.
While sanctions are meant to isolate and constrain Russia’s financial operations, they may inadvertently foster the growth of alternative financial systems centered around cryptocurrency. As seen with Garantex and Exved, sanctioned individuals and companies are increasingly turning to digital currencies to continue conducting business, thus driving innovation and expanding crypto adoption within Russia.
Mendeleev and his platforms are poised to benefit from this environment. With the backing of Russia’s new legislation, Garantex and Exved may grow in importance, facilitating transactions for entities that can no longer access traditional financial systems. These developments could lead to a self-sustaining crypto economy within Russia, where digital currencies bypass Western financial restrictions and connect Russia with other sanctioned states or crypto-friendly regions like the BRICS nations.
Compliance and Regulatory Concerns
For compliance professionals, the rise of Garantex and Exved underscores the need for enhanced due diligence on transactions involving Russian entities. The OFAC and OFSI designations of Garantex highlight the platform’s role in money laundering and sanctions evasion, but the full scale of its operations—and potential links to state actors—remains unclear.
As Russia’s crypto regime evolves, platforms like Garantex will likely become more central to sanctions evasion efforts, and their cross-border transactions will present significant challenges for anti-money laundering (AML) and counter-terrorist financing (CTF) compliance efforts worldwide.
Conclusion
Sergey Mendeleev’s ventures—Garantex and Exved—are positioned to play a crucial role in Russia’s evolving crypto landscape, particularly as the country seeks to bypass sanctions through alternative financial mechanisms. As Russia continues to integrate cryptocurrencies into its financial system, these platforms will likely grow in importance, both domestically and internationally.
For the international financial community, this presents an urgent need for regulatory vigilance, particularly in monitoring cross-border crypto transactions linked to Russia. Failure to address these emerging risks could result in a strengthening of Russia’s crypto infrastructure, allowing it to mitigate the long-term impact of Western sanctions.
