Crypto Adoption May Stabilize Ruble, Reduce Demand for USD by 22.4%

A leading Russian economist has suggested that the adoption of cryptocurrency in Russia may have contributed to the stabilization of the ruble in recent months. Oleg Vyugin, a professor at the National Research University Higher School of Economics, made this assertion during a conference on investments and trading. Vyugin, who previously served as the head of the Russian Federal Financial Markets Service and the Chairman of the Moscow Exchange, highlighted that the use of cryptocurrency in foreign trade settlements could be a significant factor in reducing the demand for hard currencies like the US dollar.

Vyugin explained that cross-border crypto trade deals do not involve hard currencies, which could be one reason why the demand for USD and other fiat currencies has been dropping. He noted that while processing settlements in cryptocurrency remains challenging, the use of alternative payment methods could reduce the need for hard currencies. Vyugin stated, “We need to take settlement factors into account. For example, we have information that Russia uses cryptocurrency in settlements with China. That is, this means that there is no demand for dollars. The dollar is not needed to carry out these settlements.”

The economist also suggested that the adoption of cryptocurrency might be impacting the demand for other fiat currencies, including the Chinese yuan. He acknowledged that his claims are based on assumptions but emphasized the potential role of crypto adoption in stabilizing the ruble. The exchange rate of the yuan on the Moscow Exchange has been steadily declining for several months, with prices falling by 22.4% from their closing levels in November last year. Similarly, the official dollar exchange rate set by the Russian Central Bank has also decreased significantly in the same period.

Despite the potential benefits of crypto adoption, the Russian Central Bank remains opposed to its use. The Central Bank wants to restrict companies to trading within the confines of its official crypto pay sandbox. However, there is a growing demand from domestic companies, including major logistics players, for a legal framework that would allow more firms to use crypto as a settlement tool for international trade. Observers believe that Russian firms began using crypto in response to the US, UK, and EU-led sanctions packages launched after the outbreak of war in Ukraine in February 2022.

In summary, the adoption of cryptocurrency in Russia may be playing a key role in stabilizing the ruble by reducing the demand for hard currencies. While the Central Bank remains opposed to crypto adoption, there is a growing chorus of domestic companies advocating for more freedom to conduct crypto-powered cross-border trades. The potential impact of crypto on the demand for fiat currencies, including the US dollar and the Chinese yuan, highlights the evolving role of digital assets in international trade and finance.