Cryptocurrency may be beneficial for the cross-border deals in crude oil trading, claims Former Russian ex-minister of Energy Department. Besides cost reduction in comparison to the fiat settlements, it will reportedly allow bypassing economic sanctions imposed by the United States and Europe on the Russian government.
Russian ex-minister of Energy Department Igor Yusufov, who currently manages Russian state space corporation has proposed to issue the “oil cryptocurrency”, secured by national oil reserves. He made this statement during the interview with “Prime” news agency.
Yusufov outlined that the project’s roadmap is almost ready. In his opinion, the usage of cryptocurrency on the global oil market will enable involved countries to overcome the excessive transaction costs and bypass sanctions:
“Given the current conditions on the global oil market and volatility of dollar settlements the logic of digital economy development suggests such a path for progress. Upon the launch of cryptocurrency platform, oil producing countries will get an opportunity to manoeuvre in terms of financial and trading restrictions that are getting excessive in the recent years. Thus, the project will bring the greater benefits to OPEC+ countries, including Russia, and enable them to increase oil and gas exports.”
The new cryptocurrency could be pegged to “the ton of referral fuel”, a unit of organic fuel generally accepted in international payments. Regarding the future perspective, Yusufov asserted that the “crypto oil” will be widely used for trading of different energy resources, such as gas or electricity, serving as a global market data source as well.
Blockchain can make “every barrel” traceable, he added. He went on saying that considering the imposed economic sanctions the platform should be set up in CIS countries, with the central authority center based in Moscow.
The former head of Russian Federal Securities Commission, Igor Kostikov, noted that the proposed “oil crypto” may be essentially used to trade any other good.
The main reason holding project back is the lack of regulation: Russian law on digital assets is expected to be adopted in 2019.
Last autumn the government of Venezuela issued the El Petro cryptocurrency allegedly backed by the national crude oil reserves. Later on, Reuters news agency conducted an investigation and reported on the absence of the required oil funds which were expected to back national crypto. Up to date, El Petro fails to pave a way out of a deep economic crisis for the country that was actively progressing during the last several years.
The president of Venezuela Nicolas Maduro used to declare that the national cryptocurrency will be widely used for the settlements of oil export trades, thus urging OPEC+ countries to use El Petro for the oil deals. According to the media reports, Maduro discussed this initiative with the Russian President Vladimir Putin during his visit to the country in December 2018.
Meanwhile, the oil industry pursues its interest in the progress of the DLT technologies. In late November 2018, the blockchain platform Vakt for the cross-border trades of crude oil was launched. This joint venture pushed by a consortium of major players, like BP, Royal Dutch Shell, Norway’s Equinor, along with global trading firms Mercuria Energy Group, Koch Supply, Trading, and Gunvor was announced in 2017. Vakt now aims to cover two-thirds of North Sea crude trades.