Russian commodities firms facing challenges in executing financial transactions with Chinese counterparts have turned to stablecoins.
In response to international restrictions and tightening compliance measures, these firms have turned to cryptocurrencies, including Tether’s stablecoin, to facilitate cross-border transactions with their Chinese clients and suppliers, according to a recent report from Bloomberg.
The report said that top executives from two major unsanctioned metals producers have confirmed their utilization of stablecoins for transactions.
Some settlements are conducted through Hong Kong, providing a workaround for the difficulties faced by Russian firms in receiving payments for their goods and purchasing equipment and raw materials.
JUST IN: US Treasury Deputy Secretary issues official statement to Senate Banking, Housing, and Urban Affairs Committee, claiming Russia is using #Tether’s $USDT stablecoin to bypass economic sanctions. pic.twitter.com/M3z1jnJZoF
— Jacob Kinge (@JacobKinge) April 9, 2024
Russian Firms Use Stablecoins as Sanctions Take a Hit
The adoption of blockchain technology and stablecoins by Russian firms highlights the lasting impact of international restrictions imposed in response to the conflict in Ukraine.
Even in China, which has not imposed sanctions and has become a key export market for Russian commodities, financial transactions have become more challenging due to the threat of secondary sanctions from the US Treasury Department.
Stablecoins offer advantages such as faster transactions and lower costs compared to traditional methods.
“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, an expert on digital currencies and co-founder at Resolv Labs.
The alternative options for Russian firms, such as slower transactions or the risk of frozen overseas bank accounts, make stablecoins an appealing choice.
Some unsanctioned companies resorted to opening numerous bank accounts in different countries, only to have them frozen one after another.
More Countries Under Sanctions Resort to Stablecoins
The use of cryptocurrencies for payments is not unique to Russian firms.
Countries under sanctions, like Venezuela, have increasingly turned to Tether for conducting transactions, often at significant discounts, with intermediaries based in Dubai facilitating these deals.
The growing role of cryptocurrencies in settlements also signifies a shift in the Russian central bank’s approach.
Previously, the Bank of Russia had considered a blanket ban on all cryptocurrencies.
However, Governor Elvira Nabiullina expressed support for experimenting with cryptocurrency payments in international transactions.
The central bank has reminded lenders that cryptocurrency payments are only acceptable for cross-border transfers and should not be advertised.
It is also considering legislation to establish a legal framework for the use of stablecoins in international transactions.
Additionally, there has been an observed increase in cryptocurrency activity among Russians in recent quarters, prompting the expansion of crypto-linked banking services in the country.
A recent United Nations report highlighted Tether’s popularity among cyber fraud and money laundering activities in Southeast Asia.
Tether has refuted these claims, emphasizing its collaboration with law enforcement and the traceability of its token.
In response to the UN report, Tether said that its collaboration with global law enforcement, including the Department of Justice (DOJ), the Federal Bureau of Investigation (FBI), and the United States Secret Service (USSS), has resulted in unparalleled monitoring capabilities, surpassing traditional banking systems.
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