Russia And Iran Eye Up Trade Using Cryptocurrencies To Avoid Dollars And Sanctions

18 Jan 2023

Russia And Iran Eye Up Trade Using Cryptocurrencies To Avoid Dollars And Sanctions

By Dominic Dudley

January 18, 2023

Russia and Iran are in talks over a plan to launch a new cryptocurrency backed by gold, which could be used in their bilateral trade deals.

The news follows a scheme revealed in August last year for Iran to use crypto-currencies to settle cross-border trade deals, as a way of bypassing the international banking system and avoiding the use of U.S. dollars. While at least one trade deal was settled using a cryptocurrency, it is not clear if there has been any wider take-up of the mechanism.

report by Russian news agency Vedomosti on January 16 cited Anton Tkachev, a member of the Russian parliament’s Committee on Informational Policy, Information Technology and Communications, as saying negotiations on the issue were ongoing, although there were some regulatory hurdles still to clear – not least the need for Russia to legalise cryptocurrencies, which is expected to happen later this year.

The news agency also quoted Alexander Brazhnikov, executive director of the Russian Association of the Crypto Industry and Blockchain, as saying the token would be developed as a ‘stablecoin’, backed by gold reserves.

Stablecoins are designed to avoid the volatility seen in the value of many other cryptocurrencies such as Bitcoin, by being pegged to a commodity or fiat currency. However, they are not risk-free. In May 2022, the value of the TerraUSD algorithmic stablecoins collapsed amid a run from investors. Australia’s central bank, the Reserve Bank of Australia, has been among those to highlight the risks involved with stablecoins, in a report issued in December.

The idea for Moscow and Tehran would be to use the new stablecoin to facilitate payments for bilateral trade, to replace traditional currencies. Iran and Russia are both under U.S. sanctions, making it hard for dollars to be used – in Russia’s case this is because of its invasion of Ukraine in February last year; in Iran’s case it is a consequence of its nuclear program and other issues.