Stablecoins come of age in Ukraine-Russia conflict
Oppressed people around the globe are already familiar with stablecoins—digital assets pegged to a stable monetary value, usually the U.S. dollar. Now with the Ukrainian-Russia conflict the rest of the world can see their benefits
Stablecoins originated as way for crypto traders to avoid constant fiat conversions. As their usefulness became apparent applications grew. Now, not only are they indispensable for crypto-trading but they are integrated into Web3 applications, used for cross border payments, and are slowly being incorporated into traditional payment systems.
Stablecoins are helping impoverished people the world over
Importantly, they also allow desperate people to maintain purchasing power amidst runaway inflation, profligate central banks, and war. Crypto commentator Nic Carter has discussed how desperate Venezuelans use applications like LocalBitcoins as a backdoor way to acquire dollar-pegged stablecoins. Crypto intelligence firm Chainalysis described in August 2020 how stablecoin Tether had become more popular in East Asia, including China, than Bitcoin. According to the report, “Tether has become the de facto fiat stand-in for Chinese cryptocurrency users and primary means of on-ramping to Bitcoin and other standard cryptocurrencies.” (It is unclear if this still remains the case after the latest Chinese crackdown). But story is the same in Turkey and Nigeria where people flee mismanaged fiat currencies for stablecoins.
Now as tensions flare in Eastern Europe in the closely watched Ukraine-Russia conflict, the world can see the value of stablecoins in real time. In Ukraine, stablecoin Tether has become so valuable it trades for a premium of as much as $1.10 for an asset designed to always peg at one dollar. In an interview with CoinDesk TV, exchange founder Michael Chobanian stated:
The majority of people have nothing else to choose apart from crypto. We’re talking about millions of dollars of cash that wants to go into crypto … but we can’t find people who are willing to do the opposite, sell it.
Both sides are using stablecoins
The story is the same on the Russian side. As sanctions threaten Moscow, ordinary Russians are ditching the ruble for stablecoins. This is tantamount to a vote of no confidence by the Russian people in the actions of the regime and may hasten its demise if citizens become averse to transacting in rubles.
As dollar-pegged stablecoins provide value everywhere, the Biden administration and its allies are seemingly the only ones not celebrating. Last November, the President’s Working Group (PWG) and other financial regulators released a scathing report on stablecoins that suggested they be fully integrated into the financial system through bank charters or banned. The report warned of myriad risks and suggested financial regulators use powers granted by the Dodd-Frank law to declare them ‘systemically important’ and thus subject to unilateral regulation if Congress did not act. An executive order declaring crypto a ‘national security’ matter is also reportedly forthcoming.
Simultaneously, central banks around the world, including the Federal Reserve, are either implementing or considering their own digital money, Central Bank Digital Currency (CBDC). But government versions of crypto would exclude stablecoin benefits of crypto yet come with many risks from being nonpersoned via a social credit score (China) to loss of financial privacy (Europe and the US). As Nic Carter states, “It’s important to understand that the popularity of stablecoins or “crypto-dollars” is not solely due to their digital nature but because of the transactional freedom that they offer to users.”
Crypto will become the currency of choice in all future conflicts
None of this is necessary. Events have shown not only do stablecoins work without subjection to the flawed and suffocating U.S. financial regulatory apparatus, but they are the currency of choice when circumstances force people into the most desperate situations. The Ukraine-Russia conflict should settle this question. The world can see in real time how stablecoins help people and how government alternatives would only entrench monetary power with those that cause or at least contribute to these conflicts (and other dire situations) in the first place.
By Jossey PLLC
A version of this post originally appeared on the blog of the Competitive Enterprise Institute https://cei.org/blog/stablecoins-come-of-age-in-ukraine-russia-conflict/