The Russian government is considering the official legalization of stablecoins for international transactions to simplify cross-border payments for Russian companies amid ongoing sanctions, Izvestia reported on July 3, citing Russia’s central bank.
According to the report, the Central Bank of the Russian Federation (CBR) is actively discussing proposals to allow the use of these crypto assets, which are pegged to stable currencies or assets such as the US dollar or gold, making them less volatile than others . cryptocurrencies.
Stablecoins can be a solution to sanctions
CBR Vice Chairman Alexey Guznov confirmed the initiative, emphasizing that the primary focus is on regulating the entire transaction chain, from transferring these assets to Russia to accumulating them and using them for cross-border payments.
Guznov indicated that this could be instituted as a permanent arrangement rather than a temporary experiment. He pointed out that while stablecoins share similarities with both digital financial assets (DFAs) and cryptocurrencies, refining the regulatory framework will be essential due to their unique characteristics and widespread popularity.
According to the report, stablecoins are considered a promising tool for international settlements, especially for transactions with BRICS countries – including Brazil, Russia, India, China and South Africa.
Experts believe that these assets can provide significant liquidity and long-term resources to the market. The Russian Union of Industrialists and Entrepreneurs (RSPP) sees stablecoins as an essential tool for improving cross-border transactions in the face of Western sanctions.
In March 2024, Russian President Vladimir Putin signed a law allowing the use of DFAs for international payments. However, this process has not yet been fully implemented due to concerns about secondary sanctions from foreign companies.
Furthermore, Russian DFAs are currently incompatible with the global crypto market, limiting their use for international payments due to convertibility and liquidity issues.
Limited use in Russia
Stablecoins are already a popular tool for global transactions. In the first quarter of 2024 alone, the total value of stablecoin transactions reached $6.8 trillion, almost equivalent to the entire volume of 2022. However, in Russia its use is currently limited to individual business initiatives, with companies mainly using it for transactions with China. .
Experts emphasize the need for clear regulatory frameworks and robust infrastructure to support stablecoin transactions. This includes defining the ‘rules of the game’ for the crypto and mining industry to facilitate legal and transparent operations.
If stablecoin payments are legalized, they could become widely available to Russian companies, including state-owned enterprises, making the process of conducting such transactions easier and more tax-friendly.
The latest round of EU sanctions in June banned European organizations from connecting to Russia’s alternative to SWIFT, the Financial Message Transfer System (SPFS). This, together with Russia’s disconnection from SWIFT in 2022, has increased the importance of developing alternative payment mechanisms.
Stablecoins, which can bypass traditional systems such as SWIFT, offer a potential solution to these challenges.