In Russia, there has been an increased demand for the US currency amid fluctuations in the rouble. Cryptocurrencies offer a digital counterpart to the dollar. However, when buying it, there are important nuances to consider
In the first minutes of trading on the Moscow Exchange on March 1, the value of the US dollar rose above 100 rubles, then it fell below 90 rubles. The Russian currency exchange rate is extremely unstable following the imposition of tough sanctions against the Bank of Russia and major Russian banks.
Amid the liquidity crisis and possible freezing of currency savings in the existing banking system, an alternative method of currency – stabelcoins – may be popular, said Nikita Zuborev, senior analyst at Bestchange.ru. There is a wide variety of tokens, the most popular being: USDT, USDC, BUSD, DAI and others.
All of them have one thing in common – their value is equated to the value of the US dollar. In conditions of uncertainty, stablecoins may be a safer way to store currency outside the global banking system, says the expert.
For cryptocurrencies, there are analogues of financial institutions, including analogues of deposits and loans, Zuborev added. That is, you can not just keep your savings in a firmer currency, but also somewhat multiply them at an interest rate comparable to foreign currency bank deposits. The specialist advised investors to look into such areas as lending, staking, yield farming and crypto saving.
But there are also geopolitical risks in the case of stablecoins, the analyst warned. The first is sanctions from major centralised exchanges. So far there are only sporadic cases reported among exchanges and quite selective freezes or plans to do so, but funds cannot be completely safe in a custodial service, as practice shows.
Cryptocurrency exchanges began imposing restrictions on residents of Russia, Ukraine and Belarus after Russian President Vladimir Putin announced a special operation in Ukraine on 24 February. BTC-Alpha, KUNA, CEX IO and Qmall have already imposed restrictions. Binance said it would not block all Russian users.
Jesse Powell, the head of Kraken cryptocurrency exchange, said that the platform does not plan to block users from Russia yet, but may do so if such a demand is received from the US authorities or other countries.
The worsening geopolitical situation has led many countries to impose new sanctions against Russia. A number of Russian banks, including the largest, Sberbank and VTB, have been hit by the sanctions. The US Department of Commerce has tightened the rules for obtaining permits to export microelectronics, avionics and aircraft parts to Russia using US technology.
The second risk of buying steibcoins is sanctions by their issuer, Zuborev added. The fact is that most stabelcoins are not typical cryptocurrencies, and they have a central authority that provides dollar liquidity to maintain the exchange rate at 1 to 1. Therefore, under certain conditions, they can freeze funds even in non-custodial wallets.
“It is worth considering these possible risks and avoid custodial wallets with KYC, or use them only for buying/selling and not storing. Also, one should not store tokens at compromised non-castodial wallet addresses if anywhere there is a binding of the wallet to its owner’s country (exchanges, marketplaces, p2p and others),” the expert warned. He noted that decentralised, algorithmically secured stablcoins like DAI by MakerDAO or UST by Terra may be the safest in these conditions.
The most popular steblycoin is USDT from Tether. It has a capitalisation of $79.5bn with daily trading volume of $60.7bn. Altcoin is listed on most major cryptocurrency exchanges. However, it is not a transparent currency, stressed Artem Deyev, head of analytics at AMarkets.
“US dollars are not backed by 100% of USDT, but only 75%. The rest is in credit obligations. This means that USDT is not an analogue of the dollar. It is as risky an asset as other cryptocurrencies,” said Deyev.
USDT is the riskiest stablecoin, Victor Pershikov, lead analyst at 8848 Invest, added. The token is not transparent and has risks of being regulated by the US and other countries’ authorities. The specialist clarified that it is not correct to keep all assets in one steblecoin, it is necessary to diversify risks.
“I recommend working with several steiblocoins, including USDT, USDC, BUSD and Paxos steiblocoin. At the same time, it makes sense to invest part of the portfolio in the most capitalised cryptocurrencies, BTC and ETH, as they also have the potential for growth against the US dollar,” concluded the expert.