New regulations from the Central Bank of Russia may effectively ban trading of Tether (USDT) within the country, experts indicate.
Nevertheless, the regulations would still allow Russian businesses to utilize USDT or other stablecoins for payment and settlement in cross-border transactions.
Is USDT Trading in Russia at Risk?
According to a report by RBC, the Central Bank has released new guidelines prior to approving trading within its cryptocurrency sandbox. These rules are scheduled to take effect on May 26.
This sandbox initiative is designed to enable Russian businesses to engage in international trade using cryptocurrency, operating under the supervision of the Central Bank.
Moscow plans to expand this sandbox in the upcoming weeks, allowing qualified and “super-qualified” investors to trade cryptocurrencies on Central Bank-approved exchange platforms.
However, the newly introduced rules specify criteria regarding which cryptocurrencies may be traded, emphasizing that these coins “must not be related to securities issued by hostile issuers.” The regulations also stress the importance of engaging with projects based in “friendly countries.”
In this context, “hostile” pertains to nations that have enacted sanctions against Russia, while “friendly” refers to countries that maintain a neutral stance toward Moscow.
The guidelines further suggest a prohibition on using coins that could be “potentially blocked” by their issuers or the payment agents controlling them, which raises concerns about the potential for operators to be compelled to destroy tokens held by Russian users.
A potential meeting between Russian President Vladimir Putin and Ukrainian President Volodymyr Zelensky could occur if certain agreements are reached, as reported by Interfax https://t.co/KykMbJbU2I.
Are Other Stablecoins at Risk?
While the Central Bank did not mention any specific cryptocurrencies in its new regulations or directly address a possible ban on USDT, experts widely believe that the majority of USD-pegged stablecoins would fail to meet the bank’s outlined criteria.
Georgy Gukasyan, Director of the Tax and Legal Department at DRT (formerly Deloitte’s Russian Branch), pointed out that the Central Bank’s definitions are “quite broad and may encompass various stablecoins.”
Mikhail Uspensky, a member of Russia’s expert council on cryptocurrency regulation, asserted that USDT “does not satisfy the bank’s new stipulations, and as a result, will not be able to operate in Russia.”
Uspensky further noted that the bank has been refining these regulations for some time, reiterating that while certain regulations are in place, “the usage of stablecoins for international transactions is not prohibited.”
Challenges with KYC Protocols
In his analysis, Gukasyan explained that Tether has obligations to provide fiat US dollars to USDT holders, but these apply only to a specific segment of token holders.
To redeem their USDT for dollars, holders must successfully navigate Know-Your-Customer and Anti-Money Laundering processes.
According to Gukasyan, these requirements align fully with the sanctions imposed on Russia, meaning Tether could “refuse to redeem” coins belonging to individuals who do not pass their verification checks at their discretion.
Furthermore, Gukasyan noted that Tether possesses the authority to block tokens in the wallets of any users at its discretion, at any time.
He highlighted the case of the Russian Garantex crypto exchange, which was taken over by U.S. authorities earlier this year, resulting in the freezing of $26 million in assets. In response, Tether collaborated with U.S. officials to freeze millions of USDT tokens associated with Garantex wallets.
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