LONDON/PARIS, July 28 (Reuters) – A rouble-backed stablecoin that could help Russia circumvent Western restrictions on payments has seen a jump in transaction volumes in July, with funds moved through the coin surging past $40 billion in total, blockchain research firm Elliptic said on Monday.
Sweeping Western sanctions since Russia’s February 2022 full-scale invasion of Ukraine, particularly the exclusion of Russian banks from the SWIFT global financial messaging system, have sorely hampered Moscow’s trading options and left Russia seeking alternative routes for cross-border payments.
Russian defence sector lender Promsvyazbank and payments firm A7, both of which are under Western sanctions, announced the launch of the new Kyrgyzstan-based stablecoin A7A5 in January, promoting its potential as a tool for foreign trade.
Elliptic, whose data and intelligence was used by the U.S. Secret Service in taking down the online infrastructure used by Russian cryptocurrency exchange Garantex in March, said in a report that A7A5 was becoming increasingly effective in helping Russian businesses and individuals avoid sanctions by bypassing the traditional financial system.
TRM Labs, another blockchain research firm, has identified A7A5 as being part of a new nexus of Kyrgyzstan-registered entities with cryptocurrency connections to sanctions evasion that is also likely tied to the import of dual-use goods from China to Russia through Central Asia.
A7A5, Promsvyazbank and A7 did not immediately respond to requests for comment.
VOLUME SPIKE
Promsvyazbank, when launching A7 in late 2024, said the platform would help Russian companies make smooth cross-border settlements and said firms could pay for services and supplies in China without using SWIFT.
A stablecoin, A7A5 enables cross-border payments that most Russian banks cannot offer. Reuters could not independently determine the source of funds in A7A5 or the reasons for the transfers.
Elliptic’s analysis showed that over $1 billion was now being transferred through A7A5 each day, with an aggregate value to date of $41.2 billion, noting a spike in volumes, liquidity and tokens in circulation in July. TRM Labs observed a similar aggregate volume.
Surging A7A5 demand has seen the stablecoin’s market capitalisation triple to $521 million in less than two weeks, Elliptic said.
A7A5 on Monday wrote on Telegram that it had injected $100 million of fresh liquidity in the stablecoin Tether (USDT) into the A7A5 DEX, a decentralised exchange.
“Demand for A7A5 to USDT at the best rates remains high, liquidity is gone in minutes,” A7A5 said.
Tether, which regularly works with global law enforcement in helping to seize illicit funds across various jurisdictions, did not immediately respond to a request for comment.
Reporting by Alexander Marrow in London and Elizabeth Howcroft in Paris; Editing by Sharon Singleton
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Alexander Marrow
Thomson Reuters
Chief companies correspondent for Russia, Alexander covers Russia’s economy, markets and the country’s financial, retail and technology sectors, with a particular focus on the Western corporate exodus from Russia and the domestic players eyeing opportunities as the dust settles. Before joining Reuters, Alexander worked on Sky Sports News’ coverage of the 2016 Olympics in Brazil and the 2018 World Cup in Russia.
Elizabeth Howcroft
Thomson Reuters
Elizabeth Howcroft reports on finance and technology, including Europe’s “fintech” industry and cryptocurrencies. She was part of the team which won a Loeb award and SABEW award for covering the collapse of crypto exchange FTX in 2022.
