Russian raw materials companies have increasingly turned to cryptocurrency to circumvent the financial obstacles posed by international sanctions.
As traditional banking channels face challenges, companies are now leveraging stablecoins, including Tether (USDT), to facilitate “seamless and rapid cross-border transactions” with their Chinese counterparts, as Bloomberg reports.
Large Russian metal producers have mainly adopted this transition, looking for effective alternatives to conventional financial systems to maintain their business operations.
How Stablecoins Are Transforming International Trade Finance
These developments respond to the broader economic situation consequences of international sanctions following the geopolitical tensions that emerged in early 2022.
According to Bloomberg, although not directly targeted by the sanctions, these companies have faced considerable obstacles in their international operations, including receiving payments and acquiring necessary materials and equipment.
In particular, the adoption of stablecoins appears to be a strategic move aimed at preserving business continuity and mitigating the risks associated with frozen bank accounts and slow traditional banking transactions.
As noted, the appeal of using stablecoins like Tether’s USDT lies in their ability to facilitate transactions quickly and inexpensively. Ivan Kozlov, digital currency expert and co-founder of Resolv Labs, explained:
With stablecoins, the transfer can take just 5-15 seconds and cost pennies, making these transactions quite efficient when the sender already has a stablecoin asset base.
Kozlov further revealed that use of cryptocurrencies Trade finance is gaining ground among unauthorized businesses and becoming a broader practice in countries facing financial restrictions or dollar “liquidity concerns.”
This highlights a growing recognition of the potential for cryptocurrencies to serve as a “trusted” medium for significant international transactions, particularly in environments where traditional financial systems pose significant operational challenges.
Russia’s current position on crypto
At the same time, the integration of cryptocurrencies into Russian trade mechanisms also means a change in the the regulatory position of the country towards digital assets.
Bloomberg noted that initially skeptical, the Russian central bank changed its mind, recognizing the potential benefits of cryptocurrencies in circumventing financial barriers.
The report said:
Previously, the Bank of Russia considered completely banning the use and creation of all cryptocurrencies, but in November, Governor Elvira Nabiullina told Parliament that she supported experimenting with such payments in transactions international.
Amid these developments, strategic advisors like Gabor Gurbacs of Tether and VanEck have recommended for the wider adoption of cryptocurrencies like Bitcoin by central banks, especially for countries experiencing a devaluation of fiat currency.
No fiat currency today is a better alternative to the US dollar. Bitcoin is the only truly better alternative. Countries with depreciating fiat currencies should consider adopting Bitcoin as a reserve currency and then legal tender.
– Gabor Gurbacs (@gaborgurbacs) May 27, 2024
Gurbacs suggests that adding Bitcoin to national reserves could ensure economic stability and diversification, proposing that countries start allocating a small percentage to cryptocurrencies and gradually increase their holdings.
Featured image created with DALL·E, chart by TradingView
