Russia Considers Permanent Legalization of Stablecoins
Russia is considering permanently legalizing stablecoins for international transactions to simplify cross-border payments for Russian companies under ongoing sanctions, according to a July 3 report from Russian news outlet Izvestia, citing the Central Bank of Russia.
The report indicates that the Central Bank of Russia (CBR) is actively discussing proposals to allow the use of these crypto assets, which are pegged to stable currencies or assets such as the US dollar or gold, making them less volatile compared to other crypto assets.
Alexey Guznov, Deputy Chairman of the Central Bank of Russia, confirmed this initiative, emphasizing that the main focus is on regulating the entire transaction chain—from transferring these assets into Russia to accumulating and using them for cross-border payments.
Guznov noted that this could become a permanent regulation rather than a temporary experiment. He pointed out that while stablecoins share similarities with digital financial assets (DFA) and crypto assets, their unique characteristics and widespread adoption necessitate fine-tuning the regulatory framework.
The report suggests that stablecoins are seen as a promising tool for international settlements, especially in transactions with BRICS countries, which include Brazil, Russia, India, China, and South Africa.
Experts believe that these assets can provide significant liquidity and long-term resources to the market. The Russian Union of Industrialists and Entrepreneurs (RSPP) also considers stablecoins an important tool for enhancing cross-border transactions in the face of Western sanctions.
In March 2024, Russian President Vladimir Putin signed a law allowing the use of DFA for international payments. However, due to concerns over secondary sanctions from foreign companies, this process has not been fully implemented.
Additionally, Russia’s DFA is currently incompatible with the global crypto asset market, limiting its use in international payments due to issues with convertibility and liquidity.
Stablecoins have already become a popular tool for global transactions. In the first quarter of 2024 alone, the total value of stablecoin transactions reached $6.8 trillion, nearly equivalent to the total volume for the entire year of 2022.
However, in Russia, the use of stablecoins is currently limited to individual company initiatives, with most firms using stablecoins for transactions with China.
Experts stress the need for a clear regulatory framework and robust infrastructure to support stablecoin transactions, including defining the “rules of the game” for crypto assets and mining to promote legal and transparent operations.
If stablecoin payments are legalized, Russian enterprises, including state-owned companies, will be able to widely use stablecoins for payments, making such transactions more straightforward and compliant.
The European Union’s latest round of sanctions in June banned European organizations from connecting to Russia’s alternative to SWIFT, the Financial Messaging System of the Bank of Russia (SPFS).
Given these developments and Russia’s disconnection from SWIFT in 2022, the importance of developing alternative payment mechanisms has increased.
Stablecoins can bypass traditional systems like SWIFT, providing a potential solution to these challenges.