Dollar Dominance: Russia, Iran Eye Gold-Backed Stablecoin for Foreign Trade

Russia and Iran are working together to launch a cryptocurrency backed by gold, with the idea the "stablecoin" could replace the US dollar for payments in international trade.

The two sanction-hit countries want to issue a "token of the Persian region" for use in cross-border transactions, Russian news agency Vedmosti reported Monday. The plan is to launch it in a special economic enclave in Astrakhan in southern Russia, which already handles Iranian shipments.

Those payments are typically done in government-issued currencies such as the US dollar, Russian ruble and Iranian rial.

But the joint project will only be able to move forward once Russia's market for digital assets is fully regulated, according to a top Moscow lawmaker. In September, the Bank of Russia accepted the need to legalize crypto for international payments to soften the impact of financial sanctions but has yet to clarify its plans.

Stablecoins are cryptocurrencies that source their value from an asset like the US dollar or gold, which are less volatile in price than digital assets. That protects investors against wild swings in the wider crypto market.

In recent months, Russia and Iran have accelerated their push to "de-dollarize" — to move away from using the greenback in commerce — think tank the Jamestown Foundation has said. They aim to increase their volume of trade to $10 billion per year via moves such as developing an alternative international payments system to SWIFT, which they are banned from.

The US dollar remains dominant as the top currency for trade and foreign reserves, even though it soared over 12% in 2022, fueled by Federal Reserve interest rate rises. But a trend toward de-dollarization has begun, analysts say, as that appreciation makes trade more expensive for buyers holding less robust currencies and as countries seek to move away from US exposure.

China, for another, has started to push for the yuan to replace the dollar in oil deals, given its increased trade with Russia after it invaded Ukraine. The rise of the so-called petroyuan could spread its influence across Asia for crude transactions.

Meanwhile, Russia and China have joined forces on another de-dollarization project. In June, President Vladimir Putin said Russia was looking to develop a new reserve currency with other BRICS nations.