Increased Stablecoin Use in Russia Since the Invasion of Ukraine and Why

Kutl Ahmedia

According to a recent research by blockchain intelligence firm Chainalysis, the use of stablecoins in Russia has increased after the country's invasion of Ukraine, which has resulted in western sanctions and high inflation. After the invasion in March, the research showed that the percentage of stablecoin transactions going to mostly Russian services jumped from 42% in January to 67% in March. Even after Russia was kicked off the SWIFT network, chainalysis suggests that cryptocurrency may have aided in financing its international trade.

An anonymous regional money laundering specialist told Chainalysis that when Russia was kicked off the international financial system SWIFT, cryptocurrencies will become more widely used for international transactions.

According to the report, regular Russians have been exchanging RUB for stablecoins to safeguard the value of their assets from the severe inflation that has persisted in the country since the start of the war.
According to the article, "although some of that may be due to corporations embracing cryptocurrency for foreign transactions," some of the surge is also likely due to ordinary Russian residents trading for stablecoins to protect the value of their assets.

In addition, Chainalysis found that "high risk" crypto activity is concentrated in Eastern Europe because of the ongoing conflict between Russia and Ukraine.

According to Chainalysis, Eastern Europe is the fifth largest regional cryptocurrency market, with $630.9 billion (about Rs. 51,93,900 crore) in value received on-chain between July 2021 and June 2022. That's consistent with previous showings and accounts for 10% of all global transaction activity within the time frame under study.
Chainalysis found that the biggest proportion of "risky or criminal" crypto activity occurred in Eastern Europe, at around 18 percent. Risky transactions account for the bulk of this increase, and the rate of illegal transactions in the bloc is lower than in sub-Saharan Africa and Latin America but on par with that in North America.

The proliferation of "high-risk exchanges," which have minimal or nonexistent know-your-customer (KYC) information rules, is a major factor in the region's high rate of dangerous activity. According to the research, such deals account for around 6% of regional transaction volume, far higher than the nearby region's 1.2%.

Sanctions imposed in reaction to the invasion of Ukraine have cut off access to many international crypto services, perhaps forcing Russians to turn to more dangerous alternatives. Last Monday, the European Union (EU) banned all wallets, accounts, and custody services for cryptocurrency from Russia.

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