In short, US economic sanctions against Iran have been effective in the past two years, reducing Iran’s economy by 10 to 20 percent. But they are also accelerating the use of cryptocurrencies such as bitcoin, which are increasingly being used by the government and the general Iranian public to prevent legal hurdles.
The Iranian government has long been interested in using cryptocurrencies to support international trade outside the traditional banking system. In July 2018, the government of President Hassan Rouhani announced its intention to launch national cryptocurrency; a month later, a news agency affiliated with the Central Bank of Iran expressed several features of national cryptocurrency and stated that the Rial – the national currency Iran is supported. Last year, multiple blockchain projects were developed by the central bank to develop cryptocurrencies for cryptocurrencies at a digital payment conference, one of which is said to have been tested by four Iranian banks, three of which are under sanctions. .
According to various reports, cryptocurrency transactions are now common among the Iranian public. In some interviews, people have described bitcoin as the only way to get money from Iran. Cryptocurrency mining, which is a heavy computing process that produces or mines, is a new encryption, also notable in Iran. With the low cost of electricity in the country and the devaluation of the Iranian rial, several Bitcoin mining workers launched an operation in Iran in 2018.
It works with cryptocurrency for $ 3,000 a month. It seems that the Iranian government has also recognized the value of the mine as an economic sector. In August 2019, after a month of severe suppression of mining activities due to the misuse of cheap electricity, the cabinet issued regulations recognizing the mine as a legal entity in the economy.
Interestingly, Iran also seems to have attracted the interest of other countries that want to cooperate through blockchain operating systems. In 2017, Sweden reportedly allowed a local startup to invest in companies listed on the Iranian Stock Exchange using Bitcoin. In November 2018, Iran-Russia blockchain industry personnel signed a cooperation agreement to develop Iran’s blockchain industry, with the goal of resolving the challenges posed by sanctions in 2019, the Trade Development Organization of Iran with representatives of eight countries, including Switzerland. , South Africa, France, Britain, Russia, Austria, Germany and Bosnia and Herzegovina held talks on the use of cryptocurrencies in financial transactions. In 2016, under the Iran nuclear deal, the United Nations and the European Union lifted sanctions against Iran. The European Union recently launched Instex, a trading channel between Europe and Iran.
Aside from the country’s specific regulations that mandate financial compliance, the standards of the Financial Action Task Force were set in 2019 and are now in effect in 37 member states. These standards require full compliance of KYCs with the level of virtual asset service providers as well as the rule of thumb, which requires both the origin and the stakeholders of cryptocurrency transactions to identify and report suspicious information. These regulations effectively take Iran out of the important cryptocurrency exchanges. This has shifted Iran’s cryptocurrency to local exchanges, where the price premium in foreign exchange is higher. Thus, Iran is losing ground to mining compared to other jurisdictions. While electricity costs are lower, other costs associated with mining, such as hardware and operation, are much higher in Iran. Meanwhile, there is still uncertainty about the future of cryptocurrency inside Iran.
Despite these challenges, there are new developments in the world of cryptography that may open up new possibilities for the Iranian government and people to escape sanctions. One of the major developments is the central bank’s increase in digital currencies, which the government has at its disposal. China and Russia have been working on the projects for some time, and an independent Chinese coin or digital yuan is expected to hit the market this year. The consequences of international sanctions are far-reaching. First, these projects inevitably run on private blockchains that do not allow tracking abroad as the Bitcoin network does. Second, these tools are completely beyond the scope of current US-led global financial architecture. Countries that are still open to working with Iran can easily find ways to do so by using such government coins.
These channels will effectively coordinate and collaborate globally with cryptographic service providers. Both global and Iranian regulations determine access to these routes. In the meantime, as long as there are loopholes in the settlement, they will surely be exploited by the regime and the Iranian people.