On AL Monitor, Maziar Motamedi reports that Iran is trying to ban the use of foreign cryptocurrencies:
Last week, Iran joined the growing list of nations to crack down on cryptocurrencies. But why did it choose this approach? Why now? What consequences will it have? As is the case with most things concerning the Iranian economy at present, the ban seems rooted in Iran’s ongoing currency issues.
The Central Bank of Iran (CBI) on April 22 announced through a directive that “all branches and affiliated units of banks, credit institutions and currency exchanges” must refrain from purchasing or selling bitcoin and all other cryptocurrencies and do away with any activities leading to their “facilitation or promotion.” The regulator said it has communicated the directive because cryptocurrencies have the potential to “turn into instruments for money laundering and financing terrorism and to be used by criminals for money transfers.”
How many Iranians are using cryptocurrency, and why?
“Naturally, I don’t like to do something illegal, but I will continue buying bitcoins if I’m left with no other viable option,” said Sepehr, a millennial Tehranian who has been purchasing and using the most popular of cryptocurrencies and a few others for micro payments outside — and inside on a few instances — of Iran’s borders since 2013.
[Nima Amirshekari, the head of the electronic banking department at the CBI-affiliated Monetary and Banking Research Institute]
cited unofficial figures as saying that 3-4 million Iranians dabble in cryptocurrencies.Iranians are bereft of common international methods of payment, including Visa and MasterCard, which can only be bought through websites that purchase them in other countries after taking hefty fees. They also do not have access to direct dollar transactions because of decadeslong US sanctions. As such, they clearly have incentives to turn to virtual currencies.
But the next step, in my opinion, is not likely to work out:
With other cryptocurrencies effectively out of the picture from a legal standpoint, Iran’s own upcoming virtual currency — first officially announced by Jahromi in a tweet — seemingly remains as the sole focus of the envisioned regulatory document.
In his remarks on April 27, Jahromi also briefly referred to many foreign media reports that liken Iran’s virtual currency to that of Venezuela’s and the prospects of circumventing US sanctions. He said, “All cryptocurrencies are capable of circumventing sanctions because they are not under supervision of the US financial regulatory apparatus, and this issue naturally exists concerning national virtual currencies as well.”
According to Amirshekari, the Monetary and Banking Research Institute has already developed a lab model of the national virtual currency and has conducted mining and transaction tests as part of a pilot program. But that is as far as it has gone up to this point, as no concrete decision has yet been made about some of the currency’s fundamental elements, such as what it will be backed by.
The problem with “national cryptocurrencies” is that the supply of “coinage” is controlled by the government, which returns the currency back into the pool with all the paper-based currencies and their risks. The point of decentralized currencies is that the generation of the representation of wealth is not, theoretically, under the control of any single entity – although, in practice, this has not proven as true as one might wish.
This problem renders national cryptocurrencies just as attractive as their paper equivalents, and with the same exchange problems.
