Russia is accelerating plans to launch its own stablecoin. The move has been sparked by an incident that happened a month ago whereby user wallets with USDT worth 2.5 billion rubles ($30 million) were frozen.  In this incident, Tether blocked access to Garantex, a Russian-based exchange. However, prior to the incident the European Union had imposed its sanction on the platform. 

Following the incident, Russia’ Finance Ministry seeks to reduce the reliance of dollar-linked stablecoins including USDT and USDC. Under the current sanctions a stablecoin backed by the Ruble could present an alternative solution for cross-border transactions. Additionally, state representatives are also considering other stablecoins pegged to other foreign fiat currencies. 

Russia’s Finance Ministry Considers Ruble-Pegged Stablecoin

According to a report by Reuters, the Finance Ministry of Russia is working to identify an alternative stablecoin that will break through global restrictions. As confirmed by Osman Kabaloev, the deputy head of the ministry’s financial policy, the country is considering developing an internal stablecoin functioning like the USDT. The stablecoin will be pegged with either the Ruble or other significant foreign currencies. 

Kabaloev stated; “The recent blockage makes us think that we need to consider creating internal tools similar to USDT, possibly pegged to other currencies.” The government official made the comment after Tether froze Garantex wallets containing more than $30 million on March 6.

Previously, regulators in Russia let the citizens engage in controlled cryptocurrency transactions in international business dealings. This decision was implemented as a measure to maintain liquidity amidst global sanctions. Furthermore, USDT functioned as the mainstream crypto for business transactions in Russia before the sanctions. 

USDT Freeze on Garantex Sparks Urgency

Following the freeze of wallets owned by Russian Garantex exchange, Russia is pushing to implement a solution as soon as possible. As per the Reuters report, the head of Russia’s central bank Elvira Nabiullina confirmed that firms in Russia are exploring other crypto options. “Russian firms are actively testing international cryptocurrency payments as part of the experiment,” the Reuters’ report read. 

Furthermore, the use of stablecoins for cross-border payments has gained attraction worldwide. These fiat-pegged digital assets help firms make international transactions in a faster manner. Stablecoins also help firms avoid traditional banking channels mostly in regions affected by sanctions. Because of this, stablecoins have garnered significant  attraction amongst Russian firms which face restricted access to global financial systems.  

Russia’s Long-Term De-Dollarization Strategy

The initiative to push for a Ruble-backed stablecoin aligns perfectly with Russia’s ongoing economic development plans. The country has consistently displayed its desire to reduce its dependence on the U.S dollar for international transactions. The trade tariff war and sanctions has further heightened the need for Russia to explore other options. 

This is not the first time Russia is considering creating its own stablecoin. As per a report by Holland Gold dated Jan. 19, 2023, Russia and Iran central banks held a discussion regarding potential creation of a gold-backed stablecoin. The proposed digital asset would facilitate international trade while eliminating dollar-driven trade. 

With Russia now continuing to develop a similar stablecoin backed by its domestic currency, this marks a shift towards crypto adoption. Furthermore, Kyrgyzstan is already advancing with its A7A5 stablecoin project. This stablecoin is will be pegged against the Ruble.