Russian Commodities Firms Embrace Stablecoins for Transactions with Chinese Counterparts
Russian commodities firms are turning to stablecoins to overcome challenges in conducting financial transactions with their Chinese counterparts. Due to international restrictions and stricter compliance measures, these firms are utilizing cryptocurrencies, including Tether’s stablecoin, to facilitate cross-border transactions with their Chinese clients and suppliers, as reported by Bloomberg.
The report confirms that top executives from two major unsanctioned metals producers have acknowledged the use of stablecoins for transactions. Some settlements are being 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.
The adoption of blockchain technology and stablecoins by Russian firms is a clear indication of the enduring impact of international restrictions imposed following the conflict in Ukraine. Even in China, which has not imposed sanctions and has become a significant 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. Ivan Kozlov, an expert on digital currencies and co-founder at Resolv Labs, explains that with stablecoins, transfers can take just 5-15 seconds and cost only a few cents, making them highly efficient when the sender already holds assets in stablecoins. The alternative options for Russian firms, such as slower transactions or the risk of frozen overseas bank accounts, make stablecoins an appealing choice.
The use of cryptocurrencies for payments is not limited to Russian firms. Countries under sanctions, like Venezuela, have increasingly relied on Tether to conduct 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 total ban on all cryptocurrencies. However, Governor Elvira Nabiullina has 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 promoted. It is also considering legislation to establish a legal framework for the use of stablecoins in international transactions.
Furthermore, there has been a noticeable increase in cryptocurrency activity among Russians in recent quarters, leading to the expansion of crypto-linked banking services in the country. A recent United Nations report highlighted Tether’s popularity in 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 stated that its collaboration with global law enforcement agencies, 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.
