Russia Bans Tether's USDT, Embraces Blockchain for Trade

The Central Bank of Russia has banned the use of Tether's USDT in the country because of fears about sanctions and asset freezes.

The Central Bank of Russia has banned the use of Tether’s USDT in the country due to concerns over sanctions and asset freezes, but is permitting the use of other cryptocurrencies such as USDT for overseas payments, a move that sees the bank moving towards alternative payment forms.

The new regulations, which will come into effect before May 26, are designed to help Russian businesses trade internationally and are putting limits on how crypto can be used in the country. Through the sandbox, firms can experiment with crypto in global trade, though they can only use the permitted tokens.

Recent reports have indicated that the dominance of USDT in Russia is waning as the Central Bank now prohibits the use of USDT within the country and is focusing its efforts on “friendly” alternative coins and non-frozen issuers. The move is part of a broader plan to reduce Russia’s vulnerability to sanctions and increase its financial independence.

Speaking at the Legal Tech Standpoint conference in Moscow, Georgy Gukasyan, the head of legal analysis at the Central Bank, stated that Russian users of Tether are currently unable to access their assets due to the cryptocurrency exchange's compliance with U.S. sanctions.

"We imposed sanctions on Tether tokens, and they are not used in the Russian Federation. This is due to the fact that Tether itself announced sanctions compliance and does not provide access to tokens to those who are subject to sanctions or to residents of sanctioned countries. As a result, we had to take this step."

Gukasyan added that while USDT cannot be used for domestic payments, using it for cross-border transactions will still be authorized by the sandbox.

The new rules mark a departure from Russia's previous stance, which saw it call for a complete ban on crypto all the way until 2022. Currently, the country is setting up a legal framework for crypto mining, international transactions, and it remains a leading country for crypto use globally.

Since blanket bans are largely ineffective, they often serve to push people towards using methods that aren't regulated.

Crypto Pivot: Russia Embraces Blockchain for Trade, But Curbs USDT

This change showcases Russia's adoption of a different strategy for cross-border settlements. Encouraging transactions with nations on good terms and non-sanctioned companies aims to safeguard financial activities from external influence. This approach seems fitting given Russia's ongoing attempts to circumvent the effects of sanctions on its international trade.

With the modifications in Russia's regulations, the implications for USDT trading in the country are significant. While there are challenges for domestic crypto investors, permitting crypto use abroad suggests a pragmatic approach to integrating cryptocurrencies. Many markets are closely following this development as it could influence the actions of other countries considering similar legislation.

Restricting USDT in Russia is likely to have repercussions in the global crypto market. Any changes in regulation in Russia could have a knock-on effect on how trading and investing take place at large.

The emphasis on alternative stablecoins and CBDCs could spark new ideas and technologies within the crypto sphere to meet the specific needs of individual countries.

Experts suggest that as USDT's role diminishes, the demand for other stablecoins and digital assets could increase. This shift might lead to greater competition among crypto issuers and a diversification of the market.