After several Russian banks were barred from the SWIFT messaging system, Russian firms have started adopting the stablecoin USDT from Tether Holdings Ltd. in cross-border transactions with Chinese businesses.
Following the revelation in a recent Bloomberg report that Russian commodities companies are using fiat-pegged digital currencies to conduct cross-border transactions with Chinese rivals, the stablecoin market is rapidly expanding.
Stablecoin from Tether Holdings Ltd. is being used by Russian commodities companies that deal in anything from base metals to lumber to pay cross-border transactions with Chinese suppliers and customers. The path of these villages passes via Hong Kong.
The US Treasury Department has imposed numerous rounds of sanctions on Chinese and Russian businesses for a variety of reasons, including a trade dispute between Beijing and Washington and a heated conflict in Eastern Europe. This has led to the attractiveness of stablecoins.
More than two years after Russia invaded Ukraine, the use of stablecoins has surged, demonstrating how Moscow has adjusted to a shifting economic landscape in which seven Russian banks were barred from the SWIFT messaging system.
Stablecoins are becoming more and more valuable, especially for cross-border transactions, as a result of the long-lasting impact of Western sanctions on Russia’s economy. Additionally, it lessens the possibility of blocked bank accounts abroad—something the Russians discovered after invading Ukraine. Stablecoins are a safer option than the established Western banking system, even for unapproved Russian businesses.
“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 increasing use of stablecoins in international trade with Russia indicates that the Russian economy is not collapsing under the weight of Western sanctions. Even the Russian Central Bank is reportedly testing out cryptocurrency payments for cross-border transactions.
One of the biggest banks in Russia, Rosbank, introduced a service about a year ago that allowed importers to settle deals with cryptocurrency. Since then, more banks have begun to provide comparable services.
Russia is not the only country embracing stablecoins. Following recent sanctions by the US on the nation, PDVSA, the state-run oil firm of Venezuela, has gradually shifted its oil sales to USDT.
Despite these advancements demonstrating the potential uses for cryptocurrencies, Neel Kashkari, the president of the Federal Reserve Bank of Minneapolis, declared in April that “[Bitcoin has] no actual utility in the economy, other than being a nice toy that some people enjoy owning and trading.”
Recently, GreatGameIndia reported that in a post on X, the National Association of Cryptocurrencies of Venezuela announced the country has banned crypto mining to protect the power grid.