May 30, 2024
By Sharan Kaur Phillora
The stablecoin sector is gaining significant traction as it facilitates Russia in settling deals with China. This shift towards crypto is driven by international sanctions challenges.
Here’s what we know:
Recent media reports highlighted that Russian firms are increasingly using stablecoins like Tether (USDT) to execute financial transactions with Chinese counterparts. Russian commodities firms, particularly in metals and timber, have found stablecoins effective for cross-border transactions. These companies have struggled with payment and procurement issues due to sanctions and tighter compliance measures.
Ivan Kozlov, co-founder at Resolv Labs, emphasized the efficiency of stablecoins, noting they enable transfers in about 5-15 seconds at lower costs. Stablecoins also help mitigate the risk of frozen overseas bank accounts, a recurring problem for Russian firms despite multiple accounts in different countries.
Stablecoins like USDT, pegged to the US dollar, provide a more stable and secure means for these transactions, bypassing traditional banking systems susceptible to sanctions. This reflects a broader shift in Russia’s regulatory landscape. The Russian central bank, which once considered banning all cryptocurrencies, is now open to experimenting with crypto payments for international transactions. In November, Governor Elvira Nabiullina expressed support for such trials, marking a significant policy change.
This isn’t unprecedented for sanctioned countries. Venezuela, for example, frequently uses Tether for oil transactions. This practice underscores the growing acceptance of stablecoins in global trade, especially in regions facing dollar liquidity issues and capital controls.
Russian lawmakers are considering legislation to create a legal framework for stablecoin use in international transactions. This indicates formal recognition of cryptocurrencies’ utility in bypassing traditional financial barriers. The central bank has noted a significant rise in cryptocurrency activity among Russians, signaling broader acceptance and integration of digital currencies in the economy.
In response to demand, Russian banks are expanding their crypto-linked services. Rosbank, for instance, started cross-border payments with cryptocurrency for businesses last June. Some commodities firms are also exploring barter deals to avoid cross-border transfers altogether, providing another way to circumvent financial restrictions.
As Russia and China navigate international sanctions complexities, stablecoins offer a promising solution for maintaining trade and financial stability, highlighting cryptocurrencies’ resilience and growing importance in global trade dynamics.
About the author
Sharan Kaur Phillora’s thirst for knowledge has led her to study many different subjects, including NFTs and Blockchain technology – two emerging technologies that will change how we interact with each other in the future. When she isn’t exploring a new idea or concept, she enjoys reading literary masterpieces.
