Russian Firms Turn To Stablecoins For China Commodities Trade Amid Sanctions

Russian commodities firms, including top metals producers, have begun using stablecoins like Tether (USDT) and other cryptocurrencies to settle cross-border transactions with mostly Chinese clients and suppliers, according to top executives at the companies who declined to be identified. This move comes as Russian companies dealing in commodities from metals to timber have been facing challenges with receiving payments for their goods and purchasing equipment and raw materials since the start of the Ukraine conflict in February 2022.

The adoption of stablecoins has gained traction even among unsanctioned Russian firms, as financial transactions with China have grown more difficult this year. This is largely due to the US Treasury Department threatening secondary sanctions on lenders facilitating sanctions evasion, which has led to a tightening of compliance measures.

“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,” said Ivan Kozlov, co-founder at Resolv Labs, which offers crypto-related products but is not involved in commodities trading. Tether’s USDT stablecoin, which is pegged to the US dollar, makes it even more convenient for exporters.

The alternative to using stablecoins often involves slower transactions or the risk of having overseas bank accounts frozen. Some unsanctioned companies have opened dozens of accounts in different countries only to see them frozen one after the other, according to one of the executives.

The lasting effect of international restrictions on the Russian economy in response to the war in Ukraine has made stablecoins an attractive option for Russian firms, even as some central bankers, like Neel Kashkari of the Federal Reserve Bank of Minneapolis, question the utility of cryptocurrencies in the broader economy.