To better enable international transactions, the governments of Russia and Iran are reportedly considering working together to develop a new stablecoin.
Iran is working with the Russian government to create a “token of the Persian Gulf region” that may be used as a form of payment in international trade, as reported by the Russian news portal Vedomosti.
According to Alexander Brazhnikov, director of the Russian Association of Crypto Industry and Blockchain, the token would likely be issued as a stablecoin backed by gold.
The stablecoin will be used in a free trade zone in Astrakhan, where Russia has started accepting goods from Iran.
For Commercial, Cross-Border Transactions
Assuming it ever comes to fruition, the planned stablecoin will replace fiat currencies like the US dollar, the Euro, the Russian ruble, and others in cross-border commerce.
Bitcoin (BTC) and Ethereum (ETH) are not recognized as legal tender in Russia, and their use as a form of payment is not endorsed by the country’s central bank.
On the other side, it opens the door for the use of cryptos in commercial transactions, including cross-border exchange.
What Is A Stablecoin?
A stablecoin is a cryptocurrency whose value is anchored to that of a fiat or commodity money or some other stable asset.
The excessive volatility of Bitcoin (BTC) and other prominent cryptocurrencies has rendered them unsuitable for everyday transactions, but stablecoins attempt to provide a more stable alternative.
A combined stablecoin effort, as noted by Russian politician Anton Tkachev, a member of the Committee on Information Policy, Information Technology, and Communications, is unlikely until the digital asset market in Russia is completely regulated.
The Russian lower house of parliament has repeatedly vowed to begin regulating crypto transactions this year, but has been repeatedly delayed.
“I can assure everyone that we will definitely have crypto as a legal product next year, there will definitely be legislation… I can only say unequivocally that it cannot be used in the Russian Federation as a means of payment for internal settlements.”
As a response to Russia’s annexation of Crimea and invasion of eastern Ukraine, EU officials passed a law making it illegal for European companies to provide cryptocurrency-related services to Russian citizens.
The Growing Stablecoin Market
Compared to roughly $30 billion at the beginning of 2021, the total value of stablecoins on issue has increased to around $185 billion by April 2022.
The failure of a significant algorithmic stablecoin and the resulting widespread volatility in crypto-asset markets in May 2022 caused the value of stablecoins on issue to fall to about US$150 billion.
Similarly unfavorable is the Central Bank of the Islamic Republic of Iran, which banned all domestic banks and financial institutions from engaging in crypto-related activities in 2018.
Crypto total market cap at $949 billion on the daily chart | Chart: TradingView.com
In an effort to protect the reliability of the national energy grid, the government has declared war on illegal bitcoin miners and temporarily halted operations for everyone.
In August 2022, Iran made history by importing products worth millions of dollars with bitcoin.
There has been a lot of growth in the stablecoin market over the past several years, with much of the action centering on a small number of stablecoins pegged to the US dollar.
Featured image by ifri.org