According to Bloomberg, Russian commodity companies that have faced obstacles in conducting financial transactions with their Chinese counterparts have started using cryptocurrencies, including stablecoins, for new settlement methods.
At least two leading metal producers (not subject to sanctions) have begun using Tether’s stablecoin and other cryptocurrencies to settle some cross-border transactions, primarily with Chinese customers and suppliers. According to unnamed executives from these companies, settlements are sometimes conducted through Hong Kong.
Since the start of the Russia-Ukraine conflict in 2022, Russian companies dealing in commodities such as nickel, steel, and timber have faced challenges in collecting payments and purchasing equipment and raw materials. This is the case even for companies that have not been sanctioned, although some have already faced multiple penalties from the US, EU, and their allies.
Even as China remains a major export market for various Russian commodities and a supplier of goods and equipment, financial transactions this year have become more difficult. This is mainly due to the US Treasury Department threatening secondary sanctions on lenders assisting in evading sanctions, leading to tighter compliance measures.
Ivan Kozlov, co-founder of Resolv Labs and a digital currency expert, stated that Tether’s stablecoin, USDT, pegged to the US dollar, is more convenient for exporters. Executives revealed that alternative options often have slower transaction speeds or, worse, face the risk of overseas bank accounts being frozen. One individual mentioned that some unsanctioned companies have opened dozens of accounts in different countries, only to have them frozen one after another.
Kozlov also mentioned that in countries facing US dollar liquidity issues and capital controls, using cryptocurrencies, particularly stablecoins pegged to the US dollar, for cross-border settlements is a common practice, not limited to commodity trades. For example, in Venezuela, a country with confirmed largest oil reserves, an increasing number of trade transactions are being completed using USDT, with many of these transactions facilitated by intermediaries based in Dubai.
Meanwhile, some commodity companies have adopted another alternative settlement method that was once considered unconventional. Insiders revealed that some steel manufacturers are using barter trade, wherein commodities are exchanged for goods shipped to Russia, completely bypassing cross-border transfers.
Source: Bloomberg
