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Highlights
- Russian firms use stablecoins like USDT to settle cross-border transactions with Chinese companies.
- Stablecoins help Russian companies avoid issues with frozen overseas bank accounts amid sanctions.
- Russian lawmakers are considering legislation to legalize stablecoin use in international deals.
The stablecoin sector is gaining significant traction as it facilitates Russia in settling deals with China. Notably, this shifting focus towards crypto is driven by the challenges posed by international sanctions.
Meanwhile, a recent Bloomberg report highlighted that Russian firms are increasingly turning to stablecoins like Tether (USDT) to execute financial transactions with Chinese counterparts.
Russian Firms Embrace Stablecoins To Settle Deals
Russian commodities firms, particularly those in metals and timber, have found stablecoins to be an effective solution for cross-border transactions. These companies have struggled to receive payments and procure equipment due to sanctions and tighter compliance measures.
However, a recent report from Bloomberg suggests that using stablecoins offers a swift and cost-effective alternative. Ivan Kozlov, co-founder at Resolv Labs, emphasizing the efficacy of stablecoins said that the digital currencies aid in facilitating the transfer in about 5-15 seconds with lower costs.
In addition, the use of stablecoins helps mitigate the risk of frozen overseas bank accounts, a problem that has plagued Russian firms. Despite opening multiple accounts in different countries, many have faced repeated freezes.
Considering that, the report suggests that stablecoins like USDT, pegged to the US dollar, provide a more stable and secure means for these transactions. Besides, it also bypasses traditional banking systems that are susceptible to sanctions.
Meanwhile, the increasing reliance on cryptocurrencies 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.
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Focus Shifts Amid Growing Adoption
Crypto’s role in international settlements is not new for countries under sanctions. For instance, Venezuela frequently uses Tether for oil transactions. Notably, this practice underscores the growing acceptance of stablecoins in global trade, especially in regions facing dollar liquidity issues and capital controls.
Meanwhile, Russian lawmakers are also considering legislation to create a legal framework for stablecoin use in international transactions. This move indicates a formal recognition of the utility of cryptocurrencies in bypassing traditional financial barriers.
The central bank has noted a significant rise in cryptocurrency activity among Russians, signaling a broader acceptance and integration of digital currencies in the economy. In response to the increasing demand, Russian banks are expanding their crypto-linked services.
Rosbank, for instance, started cross-border payments with cryptocurrency for businesses in June last year. Other banks have since followed suit, further embedding crypto in Russia’s financial ecosystem.
Some commodities firms are also exploring alternative transaction methods, such as barter deals, to avoid cross-border transfers altogether. These deals involve swapping commodities for goods shipped to Russia, providing another way to circumvent financial restrictions.
As Russia and China navigate the complexities of international sanctions, stablecoins offer a promising solution for maintaining trade and financial stability. This shift not only highlights the resilience of cryptocurrencies but also their growing importance in global trade dynamics.
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