Russia’s Oil-Backed Economy to Step Down USD for Cryptocurrency?

In the wake of hefty U.S trade sanctions against it, Russia is set to step down the use of the USD in its economy, with reports that they are mulling the idea of an oil-backed cryptocurrency that could be shared with other major oil exporting countries are growing.

Igor Yusufov, Russia’s former energy minister, who currently heads the oil and gas investment corporation Energia was quoted as saying that:

“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”.

The government’s thinking appears to be that the as the spate of the unpredictability of the global political and economic landscape rises, national currencies may not 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.

Elsewhere, the idea is getting local support as expert say it will significant erase trade barriers.

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

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?

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.