Russia considers replacing USD reserves with cryptocurrencies

The appeal of digital assets can no longer be ignored or refuted. As El Salvador embraces Bitcoin as legal tender, other countries are likely to do the same. One major development occurred recently in the global powerhouse that is Russia, with the minister of foreign affairs, Aleksandr Pankin, stating Russia’s aims to remove its reliance on the U.S. Dollar by exploring new digital asset opportunities. It is a very intriguing development and it will be interesting to see how other countries react towards this decentralised approach to current finance systems.

Russia And The U.S. Dollar

Most people who know a thing or two about history will have an easy time figuring out why Russia would like to remove itself from the global dominance of the U.S. Dollar. Both major nations have not seen eye to eye for a long time now, and it is unlikely those relations will become cordial again, at least in the near future. To Russia’ dismay, America dominates the global financial world through the U.S. Dollar, which forces them to rely on it in one way or another.

For oil trades, it is nearly impossible to bypass the USD. Therefore, Russian officials are exploring an opportunity no other countries have yet considered, which is to de-dollarize by replacing their USD reserves with digital currencies, including with cryptocurrencies. This push is powerful across the nation, and the Ministry of Foreign Affairs wants to replace the U.S. Dollar at all costs.

Although integrating digital currencies on an international level, such as a CBDC, is a bold move, it makes a lot of sense, not only for avoiding the USD for but more more practical purposes as well. Physical, traditional currency is quite clearly not suited for the modern era, and is constantly becoming more and more outdated, after all. Whether CBDCs will ever see the light of day remains unclear, but building the necessary infrastructure would allow Russian officials to explore these various options. Integrating alternative cryptocurrencies such as Bitcoin and Ethereum for example, would at a later stage, become a lot easier too.

For now, no date has been set for executing these plans, although behind-the-scenes talks hint that the intention is to replace the U.S. Dollar sooner rather than later.

How Will They Pull it Off?

Integrating digital currencies and crypto-assets seems straightforward on paper but in reality would require a lot of time and effort to pull off. While Russian government officials are convinced they can replace the U.S. Dollar without too many problems, it mightn’t be as simple.

There needs to be strong coordination between the government, financial institutions, businesses, and jurisdictions to facilitate this effort. Without, one can’t expect things to go swimmingly. However, those are all things that can be built and taken care of by the government and existing financial reserves if enough funds, time and dedication is implemented. It is an enticing thought, but such coordination and cooperation regarding bureaucracy are never straightforward. Time will tell.

A big motivator for Russia however, may be the current sanctions imposed on them by the U.S. government. Avoiding those sanctions will require a de-dollarization. Any USD payment flows through American banks and a clearing system, allowing for the blocking of any potentially suspicious transactions. Such issues do not exist with the Euro or other fiat currencies, and would clearly not arise with digital assets or currencies. It was also very interesting to hear Pankin state that this interest even extended to investing in gold reserves.

A Golden Opportunity For DeFi

Stablecoins are the most logical cryptocurrency option to integrate as they can be pegged to any Fiat currency, such as the Euro or Chinese Yuan. The problem however is that the majority of stablecoins are backed by USD reserves. As Russia’s goal is to remove these constrictions, they therefore would require alternative coins with no connection to the USD.

Thankfully, other stablecoins don’t require a USD denomination. For example, The Standard’s very own S-EURO is a stablecoin with a loose peg to the Euro. That can prove beneficial to Russian officials or any other government trying to reduce its reliance on the U.S. Dollar. The greenback is a dominant force in finance, but only as long as most countries agree to use it. With viable alternatives, such as the S-EURO, that situation may change relatively quickly.

The concept of using stablecoins isn’t as foreign as one may think. Algorithmic stablecoins with loose pegs can be generated on demand by using existing assets as collateral. By removing the need for high collateralization rates, protocols like The Standard are in a prime position to make a meaningful global impact. Moreover, DeFi protocols are not controlled by anyone, allowing for immediate access when meeting the requirements.

The Fed Dislikes Stablecoins

As the global demand for stablecoins becomes more outspoken, central banks feel the heat. The Federal Reserve, America’s central bank, has made it very clear they disapprove of stablecoins or other assets pegging their value to the U.S. Dollar. Moreover, the bank argues it can create a better central bank digital currency, or, in this case, a digital U.S. currency. However, for countries seeking to bypass sanctions, a digital U.S. Dollar would offer no real benefits when issued by the same central bank scrutinizing every transaction in physical U.S. dollars.

However, the rise of stablecoins also shows central banks like The Fed aren’t the only ones capable of pegging a digital currency to an underlying asset such as the U.S. Dollar. Instead, anyone with the correct coding knowledge or access to real-world assets can achieve this goal through blockchain technology and smart contracts. That knowledge makes central banks virtually obsolete once digital currencies become the new norm in finance.

Furthermore, nongovernmental digital tokens are making inroads in international transactions. That puts even more pressure on central banks as they have no say in using these currencies. On the other hand, it creates a much-needed sense of competition and freedom, even though financial institutions will try to oppose those ideas at every possible step.

Personally Taking Control Is Essential

For business owners and individuals looking to acquire funding through loans, the ability to leverage alternative assets rather than through fiat currencies has been made possible in recent years. That value can come from digital assets like cryptocurrencies, or tangible assets like precious metals. Borrowing against these assets without having to sell them permanently is a game-changer in the financial world. Contrary to popular belief the process is very easy, and financially beneficial. A prime example of a service provider is The Standard.

Through The Standard, everyone has this opportunity. We provide a Smart Vault system where you can temporarily lock up your existing assets supported by our Defi protocol and borrow S-EURO against the assets immediately. In future protocol updates, we will introduce support for more stablecoin currencies to suit the individual needs of our customers. We provide a hands-free way of accessing loans through existing assets, either cryptocurrencies or precious metals, such as gold.

Additionally, every holder of The Standard Token can vote on the collateralization ratio for these assets. By default, they are capped at 110% (native tokens) and 120% (public tokens), respectively. Those rates are far more competitive than any other DeFi provider or financial institution on the market. One can no longer edit collateralization levels of Smart Vaults after they have been created.

More S-EURO Use Cases

While the lending and borrowing of S-EURO is an intriguing concept, we at The Standard go one step further. Our aim is to make the Standard Euro a tool for economic freedom. Users can exchange and trade without intermediaries. Moreover, the S-EURO will become a payment method through our native Standard Debit Card.

With that Debit Card, S-EURO holders can easily convert between the Standard Euro and fiat Euro. It also allows you to spend our stablecoin for everyday purchases, bills, goods, and services.

Additionally, we are working with merchants and e-commerce providers to implement the Standard Euro as a secure payment method for online purchases. Users will spend S-EURO from their wallet directly or through the Debit Card without currency conversion. The stablecoin will be used in the same way you can use a regular Euro, creating a parallel financial ecosystem free from banks and governments.

Find out more about The Standard and our plans for the Standard Euro by reading the whitepaper.