What Happened?
Due to Tether freezing the USDT digital wallets associated with the Russian exchange Garantex (valued at approximately $30 million), Russian Treasury officials have directly proposed the development of a domestic stablecoin, potentially pegged to non-US dollar currencies, to ensure the reliability of future international payment tools. The primary reason for Russia’s consideration of developing its own stablecoin is the difficulty of traditional international payments caused by Western sanctions, necessitating alternative solutions. This also aligns with its strategic goal of “de-dollarization,” aimed at reducing dependence on the US dollar and related financial infrastructure.
Although the Central Bank of Russia remains opposed to the domestic use of cryptocurrency for payments, in light of international sanctions pressure, the government has shown a more pragmatic attitude towards utilizing cryptocurrencies for international payments (including the creation of its own stablecoin), reflecting a strategic balance between maintaining internal financial stability and addressing external challenges.
The Trigger: Tether Freezes Over $30 Million USDT from Russian Exchange Garantex
Following the freezing of the popular stablecoin USDT held in digital wallets associated with Russia last month, a senior official from the Russian Treasury recently stated that Russia should develop its own stablecoin, pegged to foreign currencies. Stablecoins are cryptocurrencies designed to maintain a stable value, typically pegged to fiat currencies such as the US dollar, and have flourished in recent years due to their utility in facilitating transactions between different cryptocurrencies or converting to cash.
For Russia, traditional international payments have become increasingly difficult due to sanctions from Western countries. As a result, Russian regulators have allowed for experimental use of cryptocurrencies in international payments. Prior to the freezing incident, USDT was a popular tool for Russian businesses to carry out international payments due to its convenience.
The catalyst for this incident was Tether, the issuer of USDT. According to Garantex, a Russian cryptocurrency exchange, on March 6, Tether froze digital wallets on its platform that held over 2.5 billion rubles (approximately $30 million) in USDT. This action was part of the 16th round of sanctions in response to Russia’s aggression against Ukraine, and Garantex suspended operations shortly after being sanctioned by the EU.
Osman Kabaloev, Deputy Director of the Financial Policy Department of the Russian Treasury, noted, “The recent freezing incident has led us to think that we need to consider creating an internal tool similar to USDT, potentially pegged to other currencies.”
Treasury Initiative: Develop Non-Dollar Stablecoins, Create Russian Alternatives
Currently, stablecoins backed by the US dollar dominate global liquidity. With the US gradually increasing regulations in the stablecoin sector, and in the face of growing financial restrictions, Russia believes it is becoming increasingly necessary to develop digital alternatives. For Russia, this may be an ideal time to enter the stablecoin competition. Due to ongoing US tariff policies and deteriorating trade relations with China, the dollar faces pressure globally, and some countries affected by high tariffs are already considering “de-dollarization.”
If Russia can launch a token pegged to the ruble or other non-dollar currencies, it would help reduce the region’s reliance on dollar-based stablecoins such as USDT and USDC, and support Russia’s long-term goal of moving away from dollar-based trade.
Notably, although Elvira Nabiullina, the Governor of the Central Bank of Russia, opposes the use of cryptocurrencies for domestic payments, she indicated that as part of government-led experiments, Russian businesses are actively testing the use of cryptocurrencies for international payments. In fact, reports have indicated that Russian companies are already using other cryptocurrencies such as Bitcoin for international transactions.
Russia has previously explored initiatives related to stablecoins. For example, in 2023, it was reported that the Central Bank discussed issuing a gold-backed digital currency with Iran, aimed at facilitating cross-border payments and positioning it as an alternative to the dollar.
Historical Review: Cautious and Contradictory Official Attitudes, Strict Limitations on Domestic Payments
The relationship between Russia and cryptocurrencies has never been straightforward. Historically, its official stance has been filled with caution, contradictions, and at times conflicting signals. However, under the pressure of recent international sanctions, Russia’s attitude, especially concerning international applications, is undergoing a pragmatic shift.
For a long time, Russia’s core attitude towards cryptocurrencies has been one of caution and even skepticism. Regulatory bodies, represented by the Central Bank of Russia and its Governor Elvira Nabiullina, have consistently maintained a high level of vigilance regarding the potential risks of cryptocurrencies. They are concerned that cryptocurrencies could undermine financial stability, be used for money laundering and other illegal activities, and erode state control over monetary policy. This concern is directly reflected in policy, as the Central Bank has repeatedly opposed the inclusion of cryptocurrencies in Russia’s legal payment system.
To address this emerging technology, Russia has gradually established a legal framework. The “Digital Financial Assets Law,” which came into effect in 2020, is a critical milestone that acknowledges the legality of cryptocurrencies as a “digital asset” or “property,” allowing citizens to hold and trade them.
However, this law also clearly delineates a red line: the use of cryptocurrencies to purchase goods and services within Russia is strictly prohibited. In other words, while cryptocurrencies themselves are not illegal, their core payment functionality is stripped domestically, creating a unique situation where they are allowed to exist but restricted in use. The attitude towards cryptocurrency mining has also fluctuated between prohibition and regulation.
However, the geopolitical upheaval, particularly the severe economic sanctions imposed by Western countries in recent years, has become an important catalyst for changing Russia’s considerations regarding cryptocurrency policy. When traditional international banking and payment channels are blocked, cryptocurrencies, especially stablecoins like USDT, have begun to be seen by Russian businesses as a potential “lifeline” for maintaining international trade.
This has also prompted internal government bodies (such as the Treasury) to exhibit a more pragmatic attitude compared to the Central Bank, beginning to explore and even permit experimental frameworks for cross-border cryptocurrency payment testing.
In the future, Russia is likely to continue seeking its unique balance between maintaining domestic financial stability and utilizing cryptocurrencies to address international challenges.
References: Reuters, BeinCrypto