According to a report from the Russian newspaper “Izvestia” on July 3rd, citing the Russian Central Bank, the Russian government is considering the 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 cryptocurrencies.
Alexey Guznov, Deputy Chairman of the Russian Central Bank, confirmed this initiative, emphasizing the primary focus on regulating the entire transaction chain from bringing these assets into Russia to accumulating and utilizing them for cross-border payments.
Guznov noted that this could potentially become a permanent regulation rather than a temporary experiment, highlighting the need for fine-tuning the regulatory framework due to the unique nature and widespread adoption of stablecoins, which share similarities with digital financial assets (DFA) and cryptocurrencies.
The report suggests that stablecoins are seen as a promising tool for international settlements, particularly in transactions with BRICS countries (Brazil, Russia, India, China, and South Africa). Experts believe these assets can 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 enhancing cross-border transactions amid Western sanctions.
In March 2024, President Putin signed a law allowing the use of DFAs for international payments, yet full implementation has been hindered by concerns over secondary sanctions from foreign companies.
Additionally, Russia’s DFAs currently lack compatibility with the global cryptocurrency market due to issues of convertibility and liquidity, limiting their use in international payments.
Stablecoins have emerged as a popular tool for global trade, with total transactions reaching $6.8 trillion in the first quarter of 2024 alone, nearly equivalent to the entire volume in 2022.
However, in Russia, stablecoin usage remains confined to individual company initiatives, predominantly for transactions with China.
Experts emphasize the necessity of clear regulatory frameworks and robust infrastructure to support stablecoin transactions, including defining rules for crypto assets and mining to promote legal and transparent operations.
Legalizing stablecoin payments would enable Russian enterprises, including state-owned companies, to extensively utilize stablecoins, thereby making such transactions more direct and compliant.
In June, the EU imposed a new round of sanctions, including banning European organizations from using Russia’s SWIFT alternative — the Financial Messaging System (SPFS).
Given these developments and Russia’s disconnection from SWIFT in 2022, the importance of developing alternative payment mechanisms has increased significantly.
Stablecoins offer a potential solution to circumvent traditional systems like SWIFT, addressing these challenges effectively.
