Russian commodities firms are increasingly using cryptocurrencies to conduct transactions with their Chinese clients and suppliers due to several challenges and restrictions in traditional financial systems. According to a Bloomberg report, executives from two major unsanctioned metals producers in Russia confirmed their use of stablecoins for transactions.
Bloomberg noted that some transactions are routed through Hong Kong, offering a solution for the challenges Russian firms face in receiving payments for their goods and acquiring equipment and raw materials.
Stablecoins are a type of cryptocurrency designed to maintain a stable value relative to a reference asset, such as the U.S. dollar or gold. This makes them more suitable for everyday transactions and payments, unlike other cryptocurrencies like Bitcoin and Ethereum.
The Russian-Ukraine war has led to the imposition of sanctions on Russian firms and individuals by various countries, including the United States, the European Union, and the United Kingdom. These sanctions aim to hinder Russia’s military and industrial capabilities, as well as its ability to support its war efforts in Ukraine.
On May 2, 2024, the United States imposed new sanctions on over 280 entities and individuals linked to Russia’s war in Ukraine. The targeted entities include 20 Chinese firms, two of which are accused of exporting drone components and supplying parts for Russian missile systems.
The European Union has sanctioned over 1,900 individuals and entities, including the Russian leadership, high-ranking officials, military staff, and prominent businesspeople and oligarchs.
The sanctions include a full prohibition on the participation of Russian nationals and entities in procurement contracts in the EU, restrictions on financial and non-financial support to Russian publicly owned or controlled entities, and the suspension of transmission and distribution of state-owned and pro-Kremlin disinformation outlets.
In other news, the United States Department of the Treasury’s Office of Foreign Assets Control (OFAC) has imposed sanctions on Russian citizen Ekaterina Zhdanova for her involvement in money laundering and transferring funds using cryptocurrencies on behalf of Russian elites.
The United Kingdom has also taken action against Russia, imposing sanctions on six prison bosses linked to Navalny’s imprisonment and freezing their assets. Additionally, new restrictions have been imposed on Russian metal, diamond, and energy exports.
The sanctions have had significant economic impacts on Russian firms. Many major international companies, such as McDonald’s, Coca-Cola, Starbucks, and Heineken, have ceased selling and manufacturing goods in Russia.
However, some companies, like PepsiCo and Avon, continue to operate there. The sanctions have also led to the freezing of assets and exclusion from financial services like Swift, which has further limited Russia’s financial resources.
Despite the sanctions, Russia has managed to find ways to maintain its economic activities. President Vladimir Putin has claimed that the sanctions have had no significant impact on Russia, and the country has managed to sell oil abroad for more than the G7’s price cap.
Russia has also increased supplies to countries like India and China and has been able to import sanctioned Western goods through countries like Georgia, Belarus, and Kazakhstan.
The alternative options for Russian firms, such as slower transactions or the risk of frozen overseas bank accounts, make stablecoins an appealing choice.
