Russia Mulls Oil-Backed Cryptocurrency to Avoid Trade Restrictions

Russia Mulls Oil-Backed Cryptocurrency to Avoid Trade Restrictions

As Russia prepares to step down the use of U.S. dollars in its economy, domestic calls for an oil-backed cryptocurrency that could be shared with other major oil exporting countries are growing.

Also see: In Senate Crypto Hearing, Bitcoin and Blockchain Get Defended, Derided

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Crypto Pegged to Oil Being Explored

“Hypothetically, an oil-backed cryptocurrency would allow oil producing countries to avoid any financial and trade restrictions that have become excessive in recent years, and to step up exports of oil and natural gas,” Igor Yusufov, Russia’s former energy minister, who currently heads the oil and gas investment corporation Energia, was quoted as saying by state-run news agency Prime.

According to Yusufov, at a time of political and economic uncertainty, national currencies can no longer be a reliable means of payment in the energy supply market, and other countries, such as members of the Organization of the Petroleum Exporting Countries (OPEC), could also be interested in using a viable alternative.

The replacement of the U.S. dollar as the main price unit in the global oil market with an oil-backed cryptocurrency would allow oil exporting countries to diversify their risks and overcome vulnerabilities tied to national currencies, Yusufov explained.

Currently, a team headed by Yusufov is developing a concept for a blockchain-based platform, on which the oil-backed cryptocurrency would be issued.

Any Other Takers?

Local experts say that the idea is vital, especially if other countries join the platform, providing more serious backing for the cryptocurrency than any single country can ensure with its own oil reserves.

“[The platform] could be used for not just oil and gas but also for any tradable commodities,” said Igor Kostikov, a financial markets expert and former head of the Federal Commission for Securities.

Oil + crypto … Russia’s path away from USD?

According to Kostikov, the new cryptocurrency could replace not just the U.S. dollar, but also the euro and all national currencies in the global oil and gas trade, if it emerges as a global coin backed by oil, gas, and other commodities as opposed to a national coin.

So far, there have been attempts to issue an oil-backed national cryptocurrency, such as Venezuela’s petro, launched this past February, but they have hardly been successful.

The question in Russia, then, is would its own project fare better?

The idea of an oil-backed cryptocurrency is being discussed in the nation at a time when the country’s leadership is working  on lowering its economy’s dependence on the U.S. dollar, which is heavily used by local companies and private individuals. Senior officials and government experts have been arguing that cryptocurrencies could play a greater role in the process of gradually dumping the U.S. currency altogether.

Bitsonline will continue tracking these threads in Russia as they continue to develop.

What’s your take? Do you think Russia launching an oil-pegged crypto would be foolhardy, or a project worth experimenting via? Let us know where you stand in the comments section below. 

Images via Pixabay

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