El Salvador Might Start a Trend of Making Crypto an International Settlements Standard

The proposal of El Salvador to take advantage of another undeveloped relevant crypto use case might raise the alarms of international regulators and conglomerates around the world.

El Salvador has proposed to settle its trade transactions with Russia using cryptocurrency, a move that could pave the way for other nations to use digital assets for international payments.

According to Alexander Ilyukhin, First Secretary of the Russian Embassy in Nicaragua, El Salvador has proposed using crypto to facilitate trade settlements between the two countries.

"El Salvador, being a dollarized country, has proposed using cryptocurrency to facilitate trade settlements between the two countries, since the calculations are currently very difficult due to El Salvador's official currency being different from that of Russia," Ilyukhin said.

This proposal marks the first time a country has officially proposed using crypto as a medium of exchange in international trade. It also highlights the potential benefits of using digital assets as a tool to circumvent geopolitical conflicts and their associated sanctions.

Bitcoin and other cryptocurrencies can simplify trading by allowing payments to be made without using traditional dollar-based channels such as SWIFT, thereby avoiding the application of sanctions and secondary sanctions by Western countries that oversee these systems.

Several nations, including Russia, are reportedly planning to integrate crypto payments into their strategies to continue trading with friendly countries outside the Western-controlled financial system.

Stablecoins may also play a role in this context, as PDVSA, Venezuela's state-owned oil company, is already settling contracts in USDT, the largest stablecoin in the cryptocurrency market. However, Tether, the issuer of USDT, has stated that it will comply with any sanctions imposed by the U.S. government through the Office of Foreign Assets Control (OFAC).

Nevertheless, bitcoin and other decentralized assets, such as ether, cannot be blocked directly and are therefore more suited to this application. If this use expands, it could mark the re-emergence of crypto as an international medium of exchange, a use case that has yet to be widely exploited.

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