Hit with severe sanctions, Russia is exploring stablecoins as an escape route from financial isolation.
Being cut off from SWIFT makes it much more difficult for Russian companies and banks to conduct international financial transactions. Russian authorities are discussing the possibility of legalizing stablecoins for international settlements, according to a recent local media report.
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The government and financial regulators see cryptocurrencies, particularly stablecoins, as potential solutions to streamline global trade for Russian companies currently under international sanctions.
Proposals have been formulated, and the matter is under active consideration, as reported by Alexey Guznov, Deputy Chairman of the Central Bank. He added that the goal is to create a stablecoin-based system.
“The question is to regulate the entire chain that would allow individuals to transfer these assets to the territory of the Russian Federation, accumulate them here, and use them for cross-border payments,” said Guznov, adding that this is a long-term plan, not a temporary fix.
In March, President Vladimir Putin signed a law that allows use of DFAs for international payments. The use of these assets is still not widespread. Concerns about secondary sanctions and low liquidity of Russian DFAs remain.
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While some stablecoins might resemble digital financial assets (DFAs) or cryptocurrencies, additional regulatory adjustments are necessary to facilitate their use in cross-border payments.
Stablecoins and blockchain can enable transactions without relying on SWIFT or other traditional payment systems, which is becoming less relevant amid new Western restrictions.
As reported, the initiative to use stablecoins for international settlements has been discussed since 2023, and a bill to regulate these experiments was developed in April. Previously, in January, a group of deputies proposed a bill to legalize a stablecoin tied to gold.
Despite the promises, financial analysts are worried that transactions with stablecoins are difficult to track by regulators, which might allow sanctioned entities to conduct transactions without fear of secondary penalties.
There will be specific regulations for them due to their unique features and popularity, according to Guznov. He said Russian authorities are working on the specifics of how the system for stablecoins will function.
While stablecoins are a focus, exploring cryptocurrencies for international payments remains a possibility, the bank executive noted.
Russia’s Softened Stance on Cryptocurrencies
Russia’s plan to integrate stablecoins into its financial payment system signals promising developments for the cryptocurrency market, particularly given the skepticism expressed by many government officials.
Speaking at a financial conference in St. Petersburg in April, Elvira Nabiullina, Governor of the Central Bank of Russia, explained the country’s softened stance on cryptocurrencies. According to her, new financial technologies create opportunities that didn’t exist before, which is why Russia is now allowing the use of digital assets for international payments.
Nabiullina’s statement represents a shift from the central bank’s previous skepticism towards cryptocurrencies, as Russia looks to find ways to circumvent sanctions and facilitate international transactions.
Russia, as the current chair of the BRICS group, has been discussing the development of the BRICS Bridge, a digital currency-based cross-border payment system. However, Nabiullina said that the cooperation required to create the system is challenging since Russia’s BRICS partners are “under extreme increasing pressure” from sanctions.
New sanctions have targeted the Moscow Exchange (MOEX), halting trading in dollars and euros. These sanctions have led the central bank to provide exchange rates based on over-the-counter FX trading instead.
China’s renminbi (digital yuan) is being used more heavily in Russia, as the country receives oil payments from China in the Chinese currency. China’s CBDC now makes up a major part of Russia’s central bank reserves.
Russia’s adoption of stablecoins could provide the necessary stability for reliable international trade, challenging the dominance of the US dollar. The move could facilitate cross-border transactions with China and other BRICS nations, and unlock investment opportunities.
