Russian Firms Adopt Stablecoins In Cross-Border Transactions With Chinese
The stablecoin sector is gaining momentum after a new Bloomberg report revealed that Russian commodities firms have adopted fiat-pegged digital currencies to execute cross-border transactions with Chinese counterparts.
Russian commodities firms, trading anything from base metals to timber, have started using Tether Holdings Ltd.'s stablecoin to settle cross-border transactions with Chinese customers and suppliers. These settlements are being routed through Hong Kong.
The appeal of stablecoins comes as the US Treasury Department has unleashed endless rounds of sanctions on Chinese and Russian companies for various reasons, ranging from a trade war between Washington and Beijing to a hot war in Eastern Europe.
The increased utilization of stablecoins comes more than two years after Russia invaded Ukraine and highlights how Moscow has adapted to a changing economic environment where seven Russian banks were banned from the SWIFT messaging system.
The lasting effect of Western sanctions on Russia's economy only makes stablecoins more useful, including for cross-border transactions. It also helps mitigate the risk of frozen overseas bank accounts—something the Russians found out after they invaded Ukraine. Even unsanctioned Russian companies have found stablecoins a safer alternative to the traditional Western banking system.
"With stablecoins, the transfer may take just 5-15 seconds and cost a few cents, making such transactions pretty efficient when the sender already has an asset base in stablecoins," said Ivan Kozlov, co-founder of Resolve Labs.
Kozlov continued, "In countries that are facing dollar liquidity issues and capital controls, cross-border settlements through cryptocurrencies and, specifically, dollar-linked stablecoins, are a relatively common practice, and not only in commodities."
The growing adoption of stablecoins in Russia's global trade reveals that Western sanctions have failed to implode the Russian economy. There's even been news of the Russian Central Bank experimenting with crypto payments for international transactions.
About a year ago, Rosbank, one of Russia's major banks, launched a facility that enabled importers to settle transactions using crypto. Since then, additional banks have started offering similar services.
The stablecoin trend doesn't end with Russia. Venezuela's state-run oil company, PDVSA, has slowly moved oil sales to USDT after the US recently imposed sanctions on the country.
Even as these developments show cryptocurrencies have use cases, President of the Federal Reserve Bank of Minneapolis, Neel Kashkari, stated in April, "[Bitcoin has] no actual utility in the economy, other than being a nice toy that some people enjoy owning and trading."