The Rise of Stablecoins in Global Trade and Their Impact

A recent research report delves into how stablecoins are reshaping the global trade landscape, particularly in their application within sanctioned countries, and their increasingly important role as a legitimate financial infrastructure.

Main Points

• Stablecoins have evolved from a fringe tool into a practical financial infrastructure in high-risk cross-border commerce, with Russia's use in oil trading as a prime example.

• Despite restrictions on cryptocurrency in the domestic market, China and India have benefited from stablecoin transactions with Russia, effectively experiencing the efficiency of decentralized finance at the national level.

• Governments around the world are adopting different responses, but there is a common recognition that stablecoins are changing the pattern of cross-border value flows.

The Rise of Stablecoins as Strategic Currency

The importance of stablecoins is continuously increasing, evolving from a personal speculative tool to an institutional practical financial instrument, and now it has become a national strategic currency. It originally gained popularity in cryptocurrency trading and later expanded to corporate cross-border payments and applications in emerging markets. Today, countries facing sanctions or seeking alternatives to the US-dominated financial system, such as Russia, are turning to the use of stablecoins.

The Practical Applications of Stablecoins in Global Trade

Russia is increasingly using stablecoins like USDT and major cryptocurrencies such as Bitcoin and Ethereum for its oil trade with China. The trading process typically involves converting the local currency into stablecoins or other digital assets, which are then transferred to the counterparty. This method bypasses Western financial intermediaries and reduces the risk of sanctions.

Despite China's strict restrictions on domestic cryptocurrency use, there seems to be a tolerant attitude towards stablecoin transactions in energy trade with Russia. This reflects a pragmatic need to maintain commodity supply chains under geopolitical pressure.

Other sanctioned countries, such as Iran and Venezuela, have also turned to using stablecoins to maintain international trade. This trend indicates that even in politically constrained environments, stablecoins have become an important tool for sustaining commercial functions.

Global Stablecoin Development Trends

Multiple countries are accelerating the exploration of stablecoin applications, not only to evade sanctions but also to enhance monetary sovereignty or respond to geopolitical changes. The regulatory attitudes and adoption progress vary among countries:

• Thailand has approved the trading of USDT and USDC.
• Japan allows the regulated issuance of USDC.
• Singapore has established a regulatory framework for a single currency stablecoin.
• Hong Kong has announced a stablecoin bill requiring issuers to obtain a license.
• The United States has no comprehensive legislation yet, but is discussing relevant bills.
• Major banks in South Korea are preparing to issue the first Korean won stablecoin.

These developments indicate that stablecoin regulation has moved from conceptual discussions to practical implementation, with countries actively shaping their legal and operational parameters.

Long-term Impact of Stablecoins

The growth of stablecoins in cross-border transactions reflects a fundamental shift in financial infrastructure. Even countries that have traditionally been skeptical of cryptocurrencies, such as China and India, are beginning to indirectly utilize stablecoins in strategic commodity trading.

Stablecoins are increasingly seen as a legitimate part of the modern financial system, rather than as tools for illegal activities. Institutions that view stablecoins as structural elements of future financial architecture may take the lead in the next wave of financial innovation.

Policymakers and financial leaders need to understand the nature of stablecoins and their long-term potential, and develop strategies that align with the evolving direction of the global financial system to adapt to this emerging layer of financial infrastructure.