Russian commodity companies struggling to conduct financial transactions with Chinese companies are turning to stablecoins as a new way to complete transactions. At least two major metals producers have begun leveraging Tether Holdings Ltd.’s stablecoin and other cryptocurrencies to settle cross-border transactions, primarily with Chinese customers and suppliers. In some cases, these settlements were delivered via Hong Kong.
The shift to blockchain-based transactions highlights the ongoing impact on the Russian economy of international restrictions imposed in response to the 2022 invasion of Ukraine. Even unauthorized Russian companies handling raw materials such as metal and wood are having difficulty receiving payment for goods and procuring equipment and raw materials. Despite China’s stance that it will not join international sanctions, challenges persist as compliance measures are tightened due to the U.S. Treasury’s threat of secondary sanctions against lenders that encourage sanctions evasion.
Stablecoins offer a faster, more cost-effective alternative for transactions, with transfers taking just seconds and costing just cents. Tether’s USDT stablecoin, pegged to the U.S. dollar, provides additional convenience for exporters. Alternatives to traditional banking carry the risk of account freezes, and some businesses are experiencing the frustration of multiple account freezes in various countries.
The growing role of cryptocurrencies in payments is not limited to Russia. That’s because sanctioned countries like Venezuela are increasingly using Tether for transactions that are often brokered through intermediaries in Dubai. This trend reflects a broader shift in the Russian Central Bank’s stance on the cryptocurrency industry. Although she previously considered an outright ban, Governor Elvira Nabiullina now supports experimenting with cryptocurrency payments in international transactions.
However, the central bank emphasized that cryptocurrency payments are only allowed for cross-border transfers and should not be promoted domestically. Legislation is being considered to create a legal framework for the use of stablecoins in international transactions.
Meanwhile, banking services linked to cryptocurrencies are expanding in Russia, with Rosbank becoming the first Russian lender to launch cross-border payments using cryptocurrencies for businesses in June last year. Since then, other banks have followed suit.
In contrast to stablecoin adoption, some commodity companies choose barter transactions to settle transactions and avoid cross-border transfers altogether. This approach, once considered exotic, involves exchanging raw materials for goods shipped to Russia.
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