According to a report from Russia’s “Izvestia” on July 3rd citing the Central Bank of Russia, the Russian government is considering formal legalization of stablecoins for international transactions, aiming to simplify cross-border payments for Russian companies amidst ongoing sanctions.
The report states that 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 like the US dollar or gold, thereby reducing their volatility compared to other crypto assets.
Alexey Guznov, Deputy Chairman of the Central Bank of Russia, confirmed this move, emphasizing the importance of regulating the entire transaction chain, from bringing these assets into Russia to accumulating and utilizing them for cross-border payments.
Guznov indicated that this could become a permanent regulation rather than a temporary experiment, noting the necessity of fine-tuning regulatory frameworks due to the unique nature and widespread use of stablecoins alongside digital financial assets (DFA) and crypto assets.
The report highlights stablecoins as a promising tool for international settlements, particularly in transactions with BRICS countries (including Brazil, Russia, India, China, and South Africa).
Experts believe these assets could provide significant liquidity and long-term resources to the market. The Russian Union of Industrialists and Entrepreneurs (RSPP) also views stablecoins as a crucial tool for strengthening cross-border transactions amidst Western sanctions.
In March 2024, Russian President Putin signed legislation allowing the use of DFAs for international payments. However, due to concerns about secondary sanctions on foreign companies, this process has not been fully implemented.
Furthermore, Russia’s DFAs currently lack compatibility with the global crypto asset market due to issues with convertibility and liquidity, limiting their use in international payments.
Stablecoins have become a popular tool in global trade. In the first quarter of 2024 alone, the total value of stablecoin transactions reached $6.8 trillion, nearly equivalent to the entire year of 2022.
In Russia, however, the use of stablecoins is currently limited to individual companies, mostly for transactions with China.
Experts stress the need for clear regulatory frameworks and robust infrastructure to support stablecoin transactions, including defining the rules for crypto assets and mining to promote legal and transparent operations.
Legalizing stablecoin payments would enable Russian enterprises, including state-owned companies, to widely adopt stablecoins for payments, thereby making such transactions more direct and compliant.
In June, the EU implemented a new round of sanctions, prohibiting European organizations from using the SWIFT alternative system, the System for Transfer of Financial Messages (SPFS), to connect with Russia.
Given these factors and Russia’s disconnection from SWIFT in 2022, there is increased importance in developing alternative payment mechanisms.
Stablecoins offer a potential solution to circumvent traditional systems like SWIFT, addressing these challenges effectively.
