- Russians have hopped on stablecoins to circumvent Western sanctions to send trading volumes to new highs.
- The decision by SWIFT to kick out Russian banks from the network plays a role in the spike in stablecoin use.
- A recent study shows that Eastern Europe has recorded the highest number of illegal and risky crypto transactions since the start of the year.
In the wake of tightening sanctions, Russians are drawn by the allure of virtual currencies as a way to settle cross-border transactions, but the Kremlin’s position remains unclear.
Russian citizens are recording higher stablecoin volumes following sanctions mounting up after the invasion of Ukraine. A report released on Oct 12 by blockchain analytics firm Chainalysis shows that Russia’s stablecoin transaction volume has spiked to 67% from 42% at the start of the year.
The increase in stablecoin volumes is linked to sanctions meted out by the European Union (EU) and citizens who wish to bypass internal virtual asset regulation by the government. The removal of Russia from the cross-border system SWIFT has seen citizens switch to cryptocurrencies to make transactions, with the preferred option being stablecoins due to their price stability.
Citizens, on their part, have opted for stablecoins against the Ruble to protect their assets amid inflation concerns.
“While some of that may be due to businesses encouraging cryptocurrency for international transactions, it’s also likely that some of the increase is due to ordinary Russian citizens trading for stablecoins to protect their asset value”, the report noted.
Last month, Russia’s Deputy Finance Minister, Alexey Moiseev, revealed that Russia is exploring stablecoins against the backdrop of Western sanctions to make payments with “friendly countries.”
“We are currently working with several countries to create bilateral platforms in order not to use dollars and euros. Stablecoins can be pegged to some generally recognized instrument, for example, gold, the value of which is clear and observable for all participants.”
Russia’s indecisive crypto policy
With the mass adoption of digital currencies, Russia initially turned its back on Bitcoin and other virtual currencies, citing regulatory concerns and possible illicit use. In 2019, the government reportedly began exploring distributed ledger technology (DLT) and decided to launch its Central Bank Digital Currency (CBDC) to mitigate the problems associated with cryptocurrencies.
At the start of the year, Russia’s President Vladimir Putin hinted that the country could do well mining Bitcoin as the miners flocked to the country following China’s crackdown in the summer of 2021. In July, Putin signed a law banning citizens from trading virtual assets, but the planned use of stablecoins for cross-border payments has left analysts wondering how Russian regulators plan to juggle both legislation regimes.