13 Oct 2022 Arjun Agarwal
Stablecoins In Russia Skyrocket After The Start Of The Ukrainian War
Russians seem to be reverting to stablecoins following the Russian invasion of Ukraine, according to a new report from blockchain analytics company Chainalysis. Indeed, the move coincides with the economic sanctions imposed on Russia and the widespread inflation.
The Chainalysis report revealed that the percentage of transaction volumes on Russian services skyrocketed from 42% in January to 67% in March and continues its adoption rate ever since.
The reasons for the stablecoin usage surge
One of the biggest reasons behind the massive increase in stablecoin usage in Russia is the country’s exclusion from the SWIFT cross-border transactions system. The exclusion, according to experts on regional money laundering, is likely to push the usage of cryptos for cross-border transactions, with stablecoins may become the preferred medium of exchange as their price remains relatively stable.
Another reason suggests that Russians are converting Rubles to stablecoins as a hedge against inflation and devaluation of Russia’s native currency.
“While some of that may be due to businesses embracing cryptocurrency for international transactions, it’s also likely that some of the increase is due to ordinary Russian citizens trading for stablecoins in order to protect their assets’ value, as we discussed previously,” Chainalysis reported.
Exchanges still operate in Russia, despite EU bans
However, another reason may still prove to be the key to Russia’s stablecoin surge. It turns out that several crypto exchanges, including global platforms, have not introduced new restrictions on Russian users after the EU’s most recent sanctions round.
The European Union tried to increase the pressure on Russia after adopting a wide range of sanctions last week, which aim to make it almost impossible for Russian residents and entities to use crypto wallets, accounts, or custody services.
And while many obliged relatively quickly to the new rules, some platforms, including Binance, seem to have lagged behind in restricting the access to their services for Russian citizens. However, Binance limited services for account balances exceeding €10,000, as required by the EU’s fifth round of restrictions, aimed at “high-value” crypto services.
Coinbase is also acting in sync with the EU sanctions, while FTX is still to impose restrictions on users from the Russian Federation. FTX is joined by Seychelles-registered Huobi Global, OKEx, Kucoin, and Mac Global, which refrained from restricting Russian accounts in response to EU penalties.
Eastern Europe leads in risky crypto activity
Meanwhile, the Chainalysis report stressed that Eastern Europe has the highest share of risky crypto activity when comparing it to any other region worldwide for 2021. It turns out that 18.2% of cryptocurrency activity in Eastern Europe is either “risky” or “illicit,” while Eastern Asia accounts for 15% of risky transactions.
“In particular, we’ve historically seen an outsized amount of ransomware and crypto-based money laundering in Eastern Europe, with the latter supported by a large ecosystem of risky cryptocurrency businesses,” Chainalysis noted.
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