Russian Use Of Crypto - USDT (Tether) versus Non-USD Alternatives

Russians relying on cryptocurrency transactions will need to change their usage to comply with new Russian Central Bank regulations implementing new rules for foreign digital rights (FDR). These regulations, which came into effect on May 26, prohibit individuals from acquiring USDT and other unfriendly US dollar-aligned stablecoins. The alternatives would appear to be gold-backed such as PAXG, as other stablecoins such as USDC are also backed by the US dollar and subject to the same regulations.

USDT is a widely used stablecoin that facilitates payments, allows money transfers to friends, covers service fees, and aids in purchasing items. However, central banks globally are eager to introduce their digital currencies to the public, completely eliminating privacy, enforcing automated tax collections, and permitting swift asset seizure when deemed necessary.

The Central Bank of Russia directive sets standards for foreign digital rights entering the Russian market. USDT does not meet the criterion of being impossible to block by the issuer or payment agents – USDT assets can be frozen for any individual in the country, as happened with $30 million worth of assets on the Russian cryptocurrency exchange Garantex in March 2025 due to US and EU sanctions.

Russians are now essentially barred from purchasing USDT and similar stablecoins; the justification for this measure is purportedly for their personal protection and the safeguarding of their assets, which does appear to align with reality to a significant extent. The new Central Bank rules require that, when issuing electronic payment, there should be no possibility of blocking.

USDT closely mirrors the traditional US dollar fiat model, and its stability isn’t perceived as overly vulnerable at the moment, however, its value is diminishing alongside the US dollar and is susceptible to the same geopolitical and budgetary uncertainties. At present, Tether is issuing nearly one billion USDT daily due to ongoing demand, primarily for purchase of Bitcoin and Ethereum.

For secure asset management, it is advisable to keep funds in Bitcoin or Ethereum, as USDT is recognized as a “hot asset” that facilitates transactions and can be easily liquidated if needed. If one adheres to legal guidelines and does not hold onto USDT for extended periods, the likelihood of the asset being frozen is low.

If, after reviewing the preceding information, the urge to acquire USDT persists, the most straightforward method to anonymously purchase USDT with rubles is through an exchanger. Numerous exchangers currently operate in or with Russia, some not requiring a passport or identity verification. They essentially function within a legal gray area but still comply with the law to some extent. Identifying such exchangers is quite simple; platforms like Exnode, KursExpert, and the “blocked in Russia” BestChange offer comprehensive monitoring, including reviews, ratings, and up-to-date pricing.

In the meantime, USDT fails to adhere to both the less stringent Russian regulations and the stricter requirements set by European central banks. In November 2024, Tether, the entity behind USDT, ceased operations for the EURT stablecoin, which had been pegged to the euro. The reason for this decision was due to the European MiCA (Markets in Crypto-Assets Requirements) that EURT did not meet. A key stipulation for issuers mandates that between 30% and 60% of the stablecoin’s reserves must be kept in bank accounts, with the exact percentage being contingent upon the type of stablecoin and the reserve amount deemed adequate by the ECB.

These conditions have presented considerable challenges for Tether. For an offshore firm managing US$151 billion in assets, establishing traditional banking partnerships can be quite difficult. It is far simpler to operate from locations such as the British Virgin Islands and to have asset holdings in cryptocurrencies such as Bitcoin and Ethereum, gold, and US Treasuries.

It is crucial to note that USDT remains incompatible with MICA, rendering it unsuitable for legal usage in Europe. Consequently, USDT is already facing bans from various European crypto exchanges. As an aside, Tether, has surpassed Germany (US$111 billion) in United States Treasury bill holdings, showcasing the benefits of a diversified reserve strategy that has helped the firm navigate the recent hyper-volatilities of the markets.

There is an interesting historical note to consider—back in May 2015, the UN Human Rights Council released a report declaring that the anonymous use of the internet is a fundamental human right. This assertion seems increasingly relevant today, as personal data is routinely traded across myriad platforms. Some conspiracy theorists now express concern that central bank digital currencies (CBDCs)—state-sanctioned digital versions of fiat money maintained by major banks—may undermine this right. Such digital currencies would ensure that all transactions are traceable to individuals, eliminating any chance for evading tax liabilities, making anonymous purchases, or safeguarding assets from governmental seizure if someone is deemed an undesirable or unfriendly entity. If these theorists are correct, it could explain why central banks are working to ban USDT – in order to elevate the use of state-controlled digital currencies.

Christine Lagarde, President of the European Central Bank, has announced that the digital euro is expected to be ready by October 2025. She emphasized the necessity of advancing the legislative process to implement the digital euro and urged the European Commission, the European Council, and national parliaments to expedite the necessary laws and directives.

The urgency of this initiative stems from the European Central Bank’s reported losses amounting to €7.8 billion and its second consecutive fiscal deficit, alongside a decline in sovereign bonds within Europe during the first two months of 2025. The ECB is looking to the digital euro to mitigate the adverse effects of its policy decisions over the past decade.

Additionally, there is a growing lack of confidence in the ECB’s policies, as sovereign bonds are no longer viewed as a reliable reserve asset, while inflation expectations continue to rise. The push for the digital euro coincides with significant spending, borrowing, and investing plans announced by European member states in defense. Therefore, the digital euro is essential for reinforcing the euro’s status as a currency, enhancing citizen control, and masking fiscal imbalances through a contentious instrument from a monetary authority that has experienced considerable credibility erosion in recent years.

It is crucial to note that the ECB’s primary mandate is price stability; however, inflation in the euro area has surpassed 22% in the past four years, while the European sovereign bond index has decreased by 14% since 2022.

Another compelling reason for expediting the digital euro is the apprehension among global central banks and investment firms regarding the potential confiscation of assets held by the Russian central bank by European nations. Such an action could establish a disastrous precedent for the assets of other countries. To prevent foreign funds from exiting the European financial system due to fears of confiscation, the digital euro may serve as an effective mechanism to enforce the currency’s usage despite declining demand.