Ever since Iranian Parliamentary Commission for Economic Affairs chairman Mohammad Reza Pourebrahimi declared recently that Iranians had moved USD 2.5 billion out of the country in cryptocurrency, the debate on digital currency has intensified, according to Cointelegraph.
In 2017, Iran began developing a local cryptocurrency which was launched earlier in May, although many are skeptical about its success. Venezuela and more recently, Russia, have expressed the merits of state-owned cryptocurrency as a possible sanction breaker.
The April announcement by Iran’s Information and Communications Technology (ICT) minister Mohammad Javad Azari-Jahromi that an experimental model of a state-run cryptocurrency was ready came as some surprise, given Iran’s current status regarding the trading of cryptocurrencies.
Iran’s Central Bank currently has a ban on cryptocurrency trading and stated recently:
“All branches of banks, credit institutions, and currency exchanges should stay clear of any sale or purchase of these currencies and avoid undertakings that facilitate or promote such currencies. Action will be taken against those who contravene the regulations.”
The current stance on cryptocurrency is very much seen as a government move to further regulate its fiat currency markets due to a slide in the value of the rial, Iran’s national currency. According to MENAfn, the rial has been nose-diving, mainly due to the threat of new US sanctions after President Trump’s recent withdrawal from the nuclear arms deal.
The financial situation is also exacerbated by a fear of an impending economic crisis and shrinking oil exports. As a result, Iran has now lowered the official value of the rial to 42,060 to the USD dollar with warnings that it could fall as much as 6% in the next fiscal year.
Another mitigating factor in the current ban on cryptocurrency is the relationship between the Iranian government and Islamic law. European University at Saint Petersburg senior lecturer of political economy Nikolay Kozhanov, an expert on Iranian external affairs, suggests:
“Iran is governed in accordance with Islamic laws, which heavily regulate the banking sphere. In general, Islamic economists ban everything that is not created by work. You cannot make ‘profit out of thin air’. To my understanding, to a certain extent, cryptocurrencies fall into that category.”
Iranian blockchain developer Arame Bandari feels that despite these difficulties, the country has kept pace with global developments, saying “…Iran has faced various type of sanctions during last 40 years, but you should consider that the Iranian young educated population has always adapted to the latest technological developments.”
However, he is quick to claim that further development of new technology has been aided by his government’s current position which seeks to promote education and tech development.
“During [the] last five years, we have witnessed a lot of good governmental support toward knowledge-based economy and we’ve observed that plenty of knowledge/technology-based SMEs [small to medium enterprises] have flourished.”
Cryptocurrency continues to be on standby, but given renewed sanctions, Iran may be forced to review its position regarding the future of the underlying technology and utilize its benefits.
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