- A Russian finance ministry official suggests developing domestic stablecoins.
- Tether freezes $27 million in USDT on sanctioned Russian exchange Garantex, highlighting the risks of relying on foreign-controlled stablecoins.
The recent freeze of USDT wallets in Russia has sparked a discussion about the country’s reliance on foreign-controlled digital assets. A high-ranking official is now advocating for the creation of stablecoins within Russia, potentially tied to other currencies. This move aims to provide a more secure and stable foundation for digital transactions within the nation, especially in light of recent sanctions.
Why Russia Is Eyeing Its Own Stablecoins
Russia is exploring the development of its own stablecoins, much like a country managing its own currency. This consideration arose after a popular stablecoin, USDT, froze accounts within Russia, raising concerns about control and accessibility. The freeze, totaling $27 million, occurred on the Russian exchange Garantex, which had been sanctioned by the US Treasury for facilitating illicit transactions in 2022. It accused it of facilitating over $100 million in illegalities.
TETHER HAS FROZEN $27 MILLION WORTH OF $USDT ON RUSSIAN CRYPTO EXCHANGE -GARANTEX. ALL TRADING AND WITHDRAWAL SERVICES HAVE NOW BEEN SUSPENDED ON THE PLATFORM,
as reported by crypto journalist Karan Singh.
USDT functions as a digital equivalent to the US dollar, commonly used for cryptocurrency trading and cross-border money transfers. However, recent sanctions prompted Tether, the company behind USDT, to freeze accounts associated with the Garantex exchange, which held a substantial amount of roubles (the Russian currency) in USDT.
Garantex subsequently halted all trading services, including cryptocurrency withdrawals, leaving users with limited access to their funds, according to an announcement on its Telegram channel.
Osman Kabaloev, the deputy head of the ministry’s financial policy department believes Russia should create its own stablecoin alternative. He stated that, “The recent blockage makes us think that we need to consider creating internal tools similar to USDT, possibly pegged to other currencies,” he said. This suggests Russia could create a digital currency pegged to a stable asset, such as the Chinese yuan, gold, or even a basket of commodities.
Stablecoins are appealing due to their relative stability and low volatility, making them useful in regions facing financial constraints or strict regulations. In Russia, many companies turned to USDT for international transactions as access to traditional payment systems became increasingly restricted due to Western sanctions.
This is evidenced by Tether’s Head of Economics, Philip Gradwell, who said its analysis of data from vendors, including Chainalysis, shows the share of activity in Europe, the Middle East and Africa has been stable over the last two years, while shifting from the region’s east to the west.
While Russia permits limited cryptocurrency use for cross-border transactions, its domestic use remains restricted. The push for homegrown stablecoins highlights Russia’s growing apprehension about relying on digital currencies controlled by foreign entities, especially after Tether’s recent actions on Garantex.
Tether has previously stated that it complies with international regulations, including sanctions enforcement, leading to similar account freezes in other regions. Despite enforcing USDT freezes on illicit transactions, Tether remains non-compliant with the EU’s MiCA regulations.