(Kitco News) – Stablecoins continue to see increased adoption from global players looking for a workaround to U.S. sanctions as Bloomberg reports that Russian commodities firms increasingly utilize fiat-pegged digital currencies to execute financial transactions with Chinese counterparts.
According to leading executives at two top metals producers – both of which have yet to be sanctioned – the firms have started using Tether (USDT) and some other cryptocurrencies to settle certain cross-border transactions, primarily with Chinese clients and suppliers.
The anonymous executives said that, in some cases, the settlements are conducted in Hong Kong.
The increased utilization of stablecoins comes more than two years after Russia first invaded Ukraine and highlights the lasting effects that sanctions have had on the Russian economy and its ability to transact across borders.
From metals like nickel and steel to other highly traded commodities like timber and oil, Russian commodity companies have faced challenges when it comes to receiving payments for their goods and purchasing equipment and raw materials since the beginning of the conflict.
Even unsanctioned companies have faced difficulties, especially when dealing with China, which didn’t join international sanctions and has become the main export market for multiple Russian commodities and a primary supplier of goods and equipment.
The U.S. Treasury Department has also threatened secondary sanctions on lenders that facilitate evading sanctions, which has led to a tightening of compliance measures. As a result, companies are increasingly utilizing stablecoins like USDT as a viable solution.
“With stablecoins, the transfer may take just 5-15 seconds and cost a few cents, making such transactions pretty efficient when the sender already has an asset base in stablecoins,” Ivan Kozlov, an expert on digital currencies and co-founder at Resolv Labs, told Bloomberg. He added that stablecoins pegged to the U.S. dollar, like USDT, make the process even more convenient for exporters.
The executives noted that the only alternatives are slower transactions or overseas bank accounts that run the risk of being frozen, as some unsanctioned companies have opened dozens of accounts in different countries only to have them frozen one by one.
“In countries that are facing dollar liquidity issues and capital controls, cross-border settlements through cryptocurrencies and, specifically, dollar-linked stablecoins, are a relatively common practice, and not only in commodities,” Kozlov said.
As a result of the need for viable payment options, the Bank of Russia has softened its stance on cryptos. At one point, the central bank considered a blanket ban on the use and creation of all cryptocurrencies. That changed in November when Governor Elvira Nabiullina told parliament that she supports experimenting with such payments in international transactions.
The Bank of Russia has since pivoted its messaging, stressing that using cryptocurrency for payments is only acceptable for cross-border transfers and that such deals should not be advertised, a person close to the central bank said.
The central bank has also said they’ve seen a significant rise in cryptocurrency activity among Russians in recent quarters, and lawmakers are due to consider legislation to create a legal framework for the use of stablecoins in international transactions.
Last June, Rosbank became the first Russian lender to start cross-border payments with cryptocurrency for businesses, according to Vedomosit, and additional banks have started offering similar services since then.
Bloomberg’s sources indicated that other commodities firms have also started to utilize so-called barter deals to settle international transactions, which involve commodities being swapped for goods shipped to Russia, completely avoiding cross-border transfers.
