Local Russian news outlets are reporting that Russia and Iran are considering a stablecoin collaboration to skirt financial and economic restrictions imposed by the US, EU, UK and other countries, in a move that could have significant implications for sanctions evasion utilising cryptocurrencies.

On January 16th, reports emerged from Russia indicating that the country intends to partner with Iran to create a stablecoin for use in cross-border trade settlement – according to Elliptic.

The reports suggest that the stablecoin would be gold-backed, and would enable Russia to pay for shipping imports from Iran in the face of severe banking restrictions that both countries face due to sanctions.

The move would not mark the first time a new cryptocurrency was created to enable sanctions evasion; in 2018, the government of Venezuela launched the petro, a cryptocurrency it created to settle oil imports in the face of sanctions, while reducing reliance on the US dollar.

The news has not yet been confirmed by sources outside Russia, and it is not clear whether the proposed move has been officially given its blessing by either country’s government.

The reports also suggest Russia would not undertake such a move until it has finalised a proposed legal and regulatory framework for cryptocurrencies, which is still making its way through the legislative process.

However, if true, the reports would hardly come as a surprise.

As Elliptic’s previous research has shown, Iran has since 2018 used its vast energy reserves to engage in Bitcoin mining to circumvent sanctions, generating as much as $1 billion in revenue in the process.

Last year, Iran acknowledged that it has used Bitcoin to pay for imports – a form of settlement that allows it to transact outside the banking system.

Russia, for its part, has had a mixed history with crypto, and at one point leaned towards banning it.

However, following its invasion of Ukraine in February 2022 and the subsequent imposition of expansive sanctions, Moscow has taken a more open stance – setting out a proposed regulatory framework that would allow crypto to be used in international trade settlement.

Russian President Vladimir Putin has also stated publicly that the country could establish a competitive advantage in Bitcoin mining owing to its energy reserves, which would allow it to take a page from Iran’s playbook.

In April 2022, the US Treasury sanctioned BitRiver, an Russian mining company, in an apparent effort to pre-empt Russia’s efforts to rely on mining to evade sanctions.

Based on these developments, a prospective Russia-Iran stablecoin settlement project is hardly far-fetched.

Any such attempt would undoubtedly be met with a response from the US, which in March 2018 issued sanctions prohibiting US citizens from dealing with the petro in response to Venezuela’s attempts to evade sanctions with crypto.

Whether or not a gold-backed, Russia-Iran stablecoin comes to fruition, the news is an important reminder for crypto exchanges and financial institutions of the need to undertake proactive sanctions compliance.