As the ruble plunges to record lows amid swingeing sanctions imposed on Russia by the West, ordinary citizens are forsaking the national currency for a stablecoin currency pegged to the US dollar.
Much of the run on cryptocurrency appears to be centred on Tether, a Hong Kong-based coin that is pegged to the dollar on a 1:1 basis.
Data shared by Arcane research with Motherboard indicates that the volume of trading between the Russian ruble and Tether reached record levels of $34.94m on Monday. This followed on from a nosedive by the national currency, which plummeted by 30% before rallying somewhat to recoup a third of its losses.
The war bonanza has elevated Tether to 519% above its average trading volume for the year to date, as Russia more than doubled its interest rates to 20%.
Pioneer cryptocurrency Bitcoin also appears to have reaped side benefits from Vladimir Putin’s decision to attack Ukraine, posting 214% weekly growth in BTC/RUB trading volumes.
A spokesman for Arcane said this stood in stark contrast to the 46% growth in global currency volumes over the same period. “Russian investors are evidently far more active in the market compared to global investors,” said Vetle Lunde.
But he stressed that Bitcoin’s recent fortunes in Russia had been dwarfed by those of Tether, in a strong indicator that – regardless of geopolitical considerations – ordinary citizens are looking to the Greenback to see them through tough economic times.
“The stablecoin trade volume outpaces that of the BTC/RUB trade volume,” said Lunde. “While the BTC volume has obviously accelerated, the tendency seems to be that Russian traders prioritize dollar exposure at the moment.”
Money vs politics
While investors in Russia may be putting geopolitics on the back seat, it remains a pressing concern elsewhere.
Tensions appear to have mounted between the cryptocurrency community and Ukraine, after major platforms Binance and Coinbase turned down a request by its deputy prime minister to ban all Russian users.
The US government’s stance on this matter is somewhat equivocal, with officials urging crypto platforms to target bans only at Russian entities who have been specifically named in sanctions, citing legal concerns.
Some in the US have voiced fears that stablecoins and other cryptocurrencies might provide a safe haven for Putin and his cronies, offering them a way to bypass sanctions.
Tether has issued a statement in response to this, saying it conducts “constant market monitoring to ensure that there are no irregular movements or measures that might be in contravention of international sanctions”, in what it claimed was a “rigorous compliance program.”
It added: “Tether regularly cooperates with global regulators and law enforcement requests and will impose freezes, as able, on assets pursuant to applicable law. These procedures are in place to protect all Tether users and the wider community.”
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