- Russia and Iran are both economically sanctioned and looking for ways to circumnavigate them.
- They are joining hands for a gold-backed stablecoin to facilitate international settlement.
- The Russian parliament feels that crypto regulations are a must and should be done before further discussions.
With rising inflation and fluctuating fiat currency prices across the globe, there is a rising concern for an alternative. Theoretically, stablecoins could be the answer. Now, Russia and Iran, both economically sanctioned nations by the west, are joining hands for international settlements to be settled by a possible gold-backed stablecoin. However, authorities feel the dire need for regulations in the crypto market first.
The largest physical gold-backed digital coin is believed to be PAX GOLD, ranking at 74 and having a market cap of $511 Million. PAX GOLD is an ERC20 token based on the Ethereum blockchain.
Iran’s central bank, in partnership with Russia, is considering the possibility of creating a digital token facilitating trade in the Persian region. The proposed gold-backed stablecoin can be used for payments in international settlements. Alexander Brazhnokov, the Executive Director of the Russian Association of crypto-economics, Artificial Intelligence and Blockchain (Racib), told the media that:
“It is assumed that the token will be backed by gold, it would be a stablecoin.”
Stablecoins are cryptocurrencies whose value is kept stable by pegging them with fiat currencies, precious metals, or algorithmically. Russia has been quite reluctant to adopt overall regulations for cryptocurrencies like Bitcoin and others, all while the Bank of Russia never supported their legalization in the country. However, a proposal was circulated last year to permit using gold-backed stablecoins.
Russia and Iran, due to certain geopolitical situations, are under sanctions. This stablecoin could be considered a way for Russia to avoid sanctions, but they are using gold to avoid them. It is the fifth largest country in gold reserves, estimated to be around $630 billion.
Anton Tkachev, a member of the Committee on Information Policy, Information Technology and Communications of the State Duma, the Russian parliament’s lower house, confirmed the negotiations’ news. Although arguing that the matter would be swiftly discussed if the cryptocurrencies were fully regulated.
Both economically sanctioned nations are looking at these crypto assets to bypass restrictions. Iran placed the first official order for import using cryptocurrency in August 2022, while Russia is looking for ways to legalize cross-border crypto payments. CBDCs are also in development, with Russia and Iran being digital ruble and crypto rial, respectively.
Crypto regulations are very important, especially after the recent collapses and corresponding market conditions. At the moment, there is no doubt regarding the potential of the technology, but with some bad players in the arena. If and when regulations are applied, the general population will be more open to the industry, increasing mass adoption.
Nancy J. Allen is a crypto enthusiast and believes that cryptocurrencies inspire people to be their own banks and step aside from traditional monetary exchange systems. She is also intrigued by blockchain technology and its functioning.
Source: https://www.thecoinrepublic.com/2023/01/27/russia-iran-join-hands-for-gold-backed-stablecoin-facilitation-of-international-settlement-in-purview/