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Russia is working with Iran on a gold-backed stablecoin

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(Kitco News) - The Central Bank of Iran is in discussions with Russia to create a new stablecoin backed by gold. According to a report from Russian news site Vedomosti, the new token would be used as a means of payment in foreign trade settlements instead of the dollar, the Russian ruble, or the Iranian rial. The source for the story was Alexander Brazhnikov, executive director of RAKIB, the Russian cryptocurrency and blockchain association.

Brazhnikov said the expectation is that the token would be a stablecoin-type cryptocurrency backed by gold. Examples of gold stablecoins are Paxos Gold (PAXG), the largest gold-backed stablecoin on the market with a $512 million market capitalization, and Tether gold (XAUT), the first gold-backed stablecoin, which has a market cap of $471 million.

The ongoing discussions about the new stablecoin were confirmed by Anton Tkachev, a member of the Duma Committee on Information Policy, Information Technology and Communications. Tkachev underlined that this issue would only be actively discussed at the state level once cryptocurrencies were fully regulated in Russia.

On Nov. 23, the Russian Duma started work on a draft amendment to the Digital Financial Assets law to regulate crypto and create a national crypto exchange. Sergey Altukhov, a member of the Economic Policy Committee for United Russia, the party which supports President Vladimir Putin and holds 72% of the seats in the Duma, confirmed the plans.

“It makes no sense to pretend that cryptocurrencies do not exist, but the problem is that it circulates in a large stream outside of government regulation,” he said. “These are billions of rubles of lost budget revenues in the form of taxes.”

Altukhov said they need to create conditions for the legalization of cryptocurrencies and adjust the “rules of the game” so that they do not contradict the position of the Central Bank and the government. He said lawmakers are now discussing the exact formula of necessary steps and strengthening their arguments in preparation for the review of regulators.

Earlier in November, Russia's Central Bank opened public consultations on stablecoins, NFTs and other tokenized financial instruments, signaling openness to the growth of crypto in the country. But just three days later, on November 10, Russia’s Central Bank (CBR) Governor Elvira Nabiullina reiterated her hardline stance on cryptocurrencies in the country.

“Regarding crypto, we are in favor of the development of digital financial assets, and the digitalization of finance,” Nabiullina said. “But digital financial assets are not limited to crypto, to private cryptocurrencies. We have not changed our position that private cryptocurrencies - for which it is not clear who is responsible, or how responsible, which are opaque and carry high risks of volatility - should not be used in settlements.”

Russia’s appetite for gold has also risen sharply since the invasion of Ukraine in February 2022, with more than 50 metric tons of physical gold purchased by Russian citizens in 2022, according to a survey of major Russian banks. Five out of the 13 largest Russian banks sold 57 tons of physical bullion last year, far more than the 40-50 tons the Russian Finance Ministry forecasted back in December. Russian citizens bought under six tons of gold in 2021, according to the World Gold Council data.

The Russian Finance Ministry also announced earlier this month that they have doubled the holding limits of gold and Chinese yuan within the National Wealth Fund (NWF). The new maximum holding limits are set at 40% for gold and 60% for yuan, up from 20% and 30% respectively. The NWF holds Russia's oil revenues, and its total value is $186.5 billion.

In April 2022, the International Monetary Fund warned that Russia could use the crypto ecosystem to get around the Western sanctions that have been imposed on the country since it invaded Ukraine in February, including using its embargoed energy sector to mine Bitcoin and raise revenues.

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