Whale-watching the stablecoin trade in ersatz roubles for sort-of dollars

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Over on mainFT there’s a story about a new rouble-backed stablecoin, called A7A5, and a new exchange that uses it, called Grinex:

A new cryptocurrency token designed to allow cross-border payments in spite of western sanctions on Russia, founded by a fugitive Moldovan oligarch and a Russian defence sector bank, has moved some $9.3bn on a dedicated crypto exchange in just four months since it was launched, the FT has found.

One of its many curiosities is about the size of this Russian crypto venture.

As we reported in the piece, there are almost 12bn A7A5 tokens in circulation, equivalent to around $156mn at the current exchange rate. Since Grinex launched, these tokens have been used to move more than $9.3bn to and from wallets that crypto analytics firms have linked to the exchange. That’s equivalent to the whole supply of the token moving in and out of Grinex wallets 60 times in just over three months.

How can that number be so big? And what’s the real scale of economic activity underpinning these moves?

The first thing to say is this: there is real stuff underpinning the volumes and we can see real-world interactions. For example, we’ve found one marketplace that allows people to trade A7A5 for USDT, the widely used dollar-pegged stablecoin from Tether.

This provides some clues about the scale of the trade in A7A5. Since the end of April, a total volume of $129mn worth of A7A5 was traded on this marketplace — most of which was switching ersatz roubles for sort-of dollars.

If you squint, the volume of trades seems to be sort-of rising, but the market is lumpy: it seems a small number of actors are occasionally converting large sums of money. At the time of our analysis, there had only been 612 swaps in total. 

While we can say that A7A5 is being used for cross-currency transactions measured in the hundreds of millions, the huge bulk of the movements we note in the piece are far away from this.

There’s a reason why the coins move so fast. A small number of wallets are routinely sending and receiving very large sums of A7A5 to and from suspected Grinex wallets. And they all show the same behaviour. 

These wallets are sent a large round sum of A7A5, worth millions or tens of millions of dollars, from one Grinex wallet. Then, a little while later (typically less than one hour) the exact same value is paid into another, different Grinex wallet. 

We found eight accounts that followed this pattern, with more than 20 transfers in total going to and from suspected Grinex wallets. Their transfers account for $4.6bn of the $9.3bn. 

The weird, mechanical nature of this means it surely isn’t an attempt to bid up interest in the token. It also doesn’t look like laundering. This is all too clunky. There is a cost to this, too: the people involved are paying “gas fees” to shift these tokens back and forth. And the sums are massive.  

It looks a lot like someone is using A7A5 in some kind of administrative financial process. And as we note in the piece, this is a stablecoin which keeps to Moscow office hours:

There are lots of possibilities here. Maybe tokens are being advanced to a third-party account as collateral while a transaction clears, then paid back? Or maybe something different is happening? Answers on a postcard, while speculation can go in the comment box.

Further reading:
— Crypto coin for Russian shadow payments moves $9bn (FT)