Russia and Iran Taking Steps Towards a Gold Stablecoin

The financial community in Moscow has been quietly abuzz with the news that the head of the Central Bank of Russia Elvira Nabiullina may pay a visit to Iran shortly to discuss the efficiencies of payments in their respective national currencies. That is to be expected, but what is buzzworthy is the plan to define and agree on the timeline and conditions for both countries to launch a gold stablecoin. The concept has been in the works for a while now, and both countries’ central banks have jointly dedicated specialists in a working group for developing such a stablecoin and have been actively working together both in Teheran and Moscow.

This effort is being prioritized as efficient trade has long been hampered concerning settlements between Russian and Iranian companies. It has been estimated that the two countries can increase their volume of trade to US$10 billion or more per year by using a payment system alternative to SWIFT, specifically by using digital financial assets (DFA), which can be secured by gold.

The Central Bank of Iran is discussing with Russia the possibility of creating a token that could replace the US Dollar, Russian Ruble, and Iranian Rial in foreign trade payments. The token would be backed by gold, meaning it would work as a stablecoin, a cryptocurrency tied to the exchange rate of fiat monies.

However, despite the close cooperation between these two central banks, the Russian authorities must still legislate the regulations for the use and circulation of cryptocurrencies before finalizing an intergovernmental agreement. It is conceivable that such legislation may be finalized in the third quarter of 2023.

The recording of such transactions would be handled by a decentralised ledger – a blockchain. The sender and receiver of the stablecoins need only provide their e-wallet details. Iran made its first purchases for imports back in August 2022 when it made a transfer of US$10 million using the system, while the Russian Central Bank has indicated it will allow this method to be used in foreign trade that cannot otherwise be executed due to sanctions. However, the use of this system in future will mean that sanctions will be rendered ineffective if countries begin using cryptocurrencies. It will impact the entire current global financial transfer system and alter the world’s economic structure.

It has been rumored that the special economic zone in Astrakhan, located on the Volga Delta of the Caspian Sea, will begin to accept cargo shipments from Iran, and the new token when agreed could be used in a pilot program for such trade settlements at that SEZ. Such a stablecoin, especially in this era of sanctions is a viable solution for trade in a SWIFT-disconnected market environment.