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(Kitco News) – Stablecoins continue to see increased adoption from global players looking for a workaround to U.S. sanctions as Bloomberg reports that Russian commodities firms increasingly utilize fiat-pegged digital currencies to execute financial transactions with Chinese counterparts.

According to leading executives at two top metals producers – both of which have yet to be sanctioned – the firms have started using Tether (USDT) and some other cryptocurrencies to settle certain cross-border transactions, primarily with Chinese clients and suppliers.

The anonymous executives said that, in some cases, the settlements are conducted in Hong Kong.

https://www.kitco.com/news/article/2024-05-29/russian-firms-turn-stablecoins-tether-and-bartering-bypass-us-sanctions

Russia decided to use USDT in order to circumvent U.S. sanctions. I was wondering if the U.S. government can do anything to make it more difficult for countries like Russia to use USDT to execute financial transactions.

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  • Not sure why this gets downvoted. Tether is U.S. firn, they may freeze whoever they wish.
    – alamar
    Commented Jun 14 at 17:47

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One common selling point of decentralized cryptocurrencies over legal tender (official, state-issued currencies) is that governments are not able to meddle in their exchange as they are able to when using the regular finance systems. Their decentralized nature means that anyone can exchange funds with anyone else without going through any financial institutions which can be regulated by a government. Sometimes the transactions themselves can not even be traced (although that's a matter of technical details which might apply to some cryptocurrencies but not to others). This means that it is very difficult for law enforcement to find out who bought what from whom.

However, one thing governments can regulate is the transfer of capital in and out of the cryptocurrency system. If one wants to obtain cryptocurrency, they usually buy it with legal tender. If one wants to use the cryptocurrency they obtained to buy goods and services from people who don't use cryptocurrency, then they need to sell their cryptocurrency for legal tender. This usually means that they need to interact with the regular finance system.

So this exchange of legal tender for cryptocurrency is something governments are able to regulate. It would be possible to outlaw the buying or selling of cryptocurrency completely, or to subject it to bookkeeping duties which would require people to disclose what business they are doing and with whom.

But, only within their own legal jurisdiction. There is not much the US or EU can do to regulate Russian companies exchanging Rubel for cryptocurrency or Chinese companies exchanging Yuan for cryptocurrency.

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  • "There is not much the US or EU can do to regulate Russian companies exchanging Rubel for cryptocurrency" - in fact there's not much they can do, short of war, to regulate the exchange of rubles for any foreign goods and services. The usefulness of cryptocurrency - rather than direct trade in rubles - is primarily to protect the counterparties to the Russian trade from secondary action by the US state, or to allow companies directly under US jurisdiction to secretly bust the sanctions. It's just the electronic form of gold in suitcases.
    – Steve
    Commented Jun 18 at 19:29

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