Russia and Iran are apparently discussing collaborating to build a new stablecoin to improve international transactions.
According to the Russian news portal Vedomosti, Iran is collaborating with the Russian government to develop a “token of the Persian Gulf region” that may be used as a form of payment in international trade.
The token will most likely be launched as a stablecoin backed by gold, according to Alexander Brazhnikov, director of the Russian Association of Crypto Industry and Blockchain.
The stablecoin will be used in an Astrakhan free trade zone, where Russia has begun allowing Iranian goods.
For commercial and cross-border transactions
If it ever becomes a reality, the projected stablecoin will replace fiat currencies such as the US dollar, Euro, Russian ruble, and others in cross-border transactions.
Bitcoin (BTC) and Ethereum (ETH) are not legal tenders in Russia, and their usage as payment methods is not sanctioned by the country’s central bank.
On the other hand, it allows for the use of cryptocurrency in commercial activities, including cross-border exchange.
What is a stablecoin?
A stablecoin is a cryptocurrency whose value is tied to the value of fiat currency, commodity money, or another stable asset.
Because of the extreme volatility of Bitcoin (BTC) and other major cryptocurrencies, they are unsuitable for everyday transactions, but stablecoins try to provide a more stable alternative.
According to Russian legislator Anton Tkachev, a member of the Committee on Information Policy, Information Technology, and Communications, a unified stablecoin effort is unlikely until Russia’s digital asset market is fully regulated.
The Russian lower house of parliament has frequently stated that it will begin regulating cryptocurrency transactions this year, but this has been continually postponed.
“I can tell everyone that crypto will be a legal commodity next year, and there will be legislation… I can only state unequivocally that it cannot be used to pay for internal Russian Federation settlements.”
In response to Russia’s annexation of Crimea and invasion of eastern Ukraine, EU officials established legislation prohibiting European companies from providing cryptocurrency-related services to Russian citizens.
The Growing Stablecoin Market
The total value of stablecoins on the issue has climbed from over $30 billion at the start of 2021 to around $185 billion by April 2022.
The failure of a big algorithmic stablecoin and the accompanying widespread volatility in crypto-asset markets in May 2022 caused the value of stablecoins on the issue to fall to around US$150 billion.
Similarly, the Islamic Republic of Iran’s Central Bank prohibited all domestic banks and financial institutions from engaging in crypto-related operations in 2018.
To ensure the reliability of the national electrical grid, the government waged war on unauthorised bitcoin miners and temporarily halted operations for everyone.
Iran made history in August 2022 when it imported things worth millions of dollars using bitcoin.
The stablecoin market has seen significant growth in recent years, with much of the action centered on a small number of stablecoins linked to the US dollar.