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De-Dollarization: Russia’s Controversial $10 Billion Bitcoin Investment Rumor

De-Dollarization

Reports of a probable investment in Bitcoin by the Russia Federation in values of USD 10 billion, targeted at evading US sanctions, are making headlines.

Most of the reports cite Russian economist Vladislav Ginko, who claimed to work with his state government. He took to Twitter responding to crypto analyst Chris Burniske‘s assessment of blockchain’s value (monetary perspective) relative to global asset values.

5/ Take global asset values:

Gold: $7.7T
Stock Markets: $73T
Broad-Money: $90T
Debt: $215T
Real Estate: $217T
Derivatives (low-end): $544T

Placing the world over $1 quadrillion in value, where monies most broadly defined represent < 10% of that value.https://t.co/Rvq5ISNvyU

— Chris Burniske (@cburniske) January 6, 2019

Vladislav inferred in his Tweet that Russia’s role in Bitcoin adoption will be highlighted when the country would have invested “almost USD 470 billion [of its] reserves into Bitcoins”, further making a conjecture that he expects USD 10 billion to be the minimum investment by the end of the first quarter of this year.

Chris, I believe sitting here in Moscow, Russia, that the real factor of Bitcoin apotion will be when Russian government I’m working for will start investing almost $470 billion reserves into Bitcoins. I expect that it’ll be at least $10 billion in the first quarter of this year.

— Vladislav Ginko (@martik) January 6, 2019

Vladislav further said that the intended “de-dollarization is actually forced by US sanctions when Russia is going to be almost switched off from US payments for its oil & gas”, referring to the alleged proposed investment in Bitcoin.
Indeed, the US Congress had imposed sanctions on Russia after the assertion of US intelligence agencies claiming that Russia interfered with the 2016 Presidential election and the alleged poisoning of former Russian military officer Sergei Skripal.

Although President Vladimir Putin has recently recognized the place of cryptocurrency in finance, he has given no hint as to when such a venture would be possible within the Russian Federation.

So far, the Russian government has made no official statement regarding the news about the Bitcoin investment. At best it’s conjecture, and if it isn’t, turning to Bitcoin to boycott US sanctions may not turn out so well for the Russian government in terms of trade relations, taking an example of how Iran and Venezuela’s plans to bypass US sanctions using cryptocurrencies are being foiled.

However, the possibility of considering a decentralized currency such as Bitcoin may not be as easily dismissed as news of Russia dumping USD 101 billion for euro and yuan in its recent de-dollarization plan was a laudable attempt to seek an alternative to the Greenback.

 

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Crypto vs Gold Debate Heats Up at Israeli Conference

Crypto vs Gold Debate Heats Up at Israeli Conference

American computer scientist and cryptographer Nick Szabo has suggested that cryptocurrencies such as Bitcoin will begin to be used far more frequently as rescue packages for struggling economies, particularly in nations hit by sanctions, and that gold will be heavily supplemented by cryptocurrency in the future.

Countries currently facing sanctions from the US alone include Cuba, Venezuela, North Korea, Iran, Zimbabwe, Syria, Russia, Somalia, Sudan, and Yemen. To date, Venezuela has been the most prominent in adopting a cryptocurrency solution for its failing economy, with Zimbabwe and Iran also turning to a central bank cryptocurrency to fight economic pressure and sanctions.

Zimbabwe’s central bank imported over USD 400 million last year in an attempt to ease the cash shortage, with citizens traveling to border towns South Africa to access cash from international banks, in a virtually cashless economy. During the past six months, the country has shifted from a total ban on cryptocurrency to viewing it as a solution to its economic plight.

At the recent Israel Bitcoin Summit in Tel Aviv, Szabo said that hyperinflated countries are increasingly turning to cryptocurrency and central banks will show a greater dependency on digital currencies to supplement gold reserves moving forward. He also referred to gold’s historical vulnerability as a reason for promoting cryptocurrency as a global reserve, arguing:

“The other problem with gold reserves is that they’re physically vulnerable. When the Nazis conquered countries in Europe, the first place they went to was a central bank’s gold reserves.”

At the same conference, Israel’s Head of the National Economic Council, Avi Simhon, made comments that Bitcoin technology was inefficient and would consequently become obsolete, a suggestion that Szabo refuted.

Reportedly, Szabo’s comments were in response to the statements made by Simhon claiming that cryptocurrencies will be the future, and nations will turn to crypto over gold, given time.

 

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Iran Reinforces Its Stance Against Telegram Crypto

Iran Reinforces its Stance Against Telegram Crypto

The Iranian government has reinforced its position on the ban of Telegram messaging app in a recent post by the Tehran Times yesterday.

According to the news outlet, the Secretary of Criminal Content Definition Task Force Javad Javidnia said: “One of the most important factors in banning Telegram was a sense of serious economic threat from its activities.”

The authorities have also issued warning against those with intent to support the native cryptocurrency of the app Gram, saying that “any cooperation with Telegram messaging app to launch Gram, the messaging app’s cryptocurrency, in Iran constitutes an action against national security and will be dealt with as a disruption to the national economy.”

The Iranian government has been hostile towards the Telegram messaging app since the political rouse in December 2017.  It was also reported that head of Iran’s High Council for Cyberspace Hassan Firouzabadi, wrote in an op-ed that it was not in Iran’s interest to continue allowing access to Telegram inside the country. The government decided to ban its use or association with its tokens in the region since early 2018.

Telegram is well known for its high-end encryption model as well as for being the go-to app for crypto-related community building. It was involved in a seed funding round where it raised USD 1.7 billion, notably one of the most successful crowdfunding in 2018.

Iran had criticized the Telegram ICO giving the impression that it “undermined the national currency.” However, in a recent development, the Iranian government was in the process of developing its own cryptocurrency in an attempt to undermine the sanctions being imposed by the US which is currently taking a toll on the economy.

Iran is not the only one against the messaging platform. The Russian government has also made attempts to ban the messaging app when it refused to hand over its encryption keys. Efforts to that end have proven to be unsuccessful so far.

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US Attempts to Foil Iran’s Proposed Sanction-Busting Crypto

US Attempts to Foil Iran's Proposed Sanction-Busting Crypto

The US Congress is introducing draft legislation that could steamroll any plans that Iran has to effectively beat sanctions through adopting a national cryptocurrency. Iranian officials have declared that a sanction-breaker cryptocurrency is being implemented shortly.

The new legislation now passing through Congress to become law would ban US citizens from any transactions in which Iranian cryptocurrency is used.

Draft legislation has been introduced by the US Congress in order to prevent damaging the nation’s sanctions imposed on Iran. If made law, the proposed ‘Blocking Iran Illicit Finance Act’ would impose sanctions on any foreign nationals who are seen to support the development of an Iranian national cryptocurrency.

This after Iran declared last month its national cryptocurrency was ready to be deployed, as the US sanctions go into full effect. The goal of the national cryptocurrency is to conduct international business since Iran’s international payment systems have been crippled. The international payments network SWIFT has also severed ties with Iranian banks. Additionally, due to the sanctions, Bittrex and Binance have stopped serving Iranian customers. Essentially, it is illegal for any company that does business in the United States to also do business in Iran.

The bill proposal states that “all transactions related to, provision of financing for, and other dealings in Iranian digital currency by a United States person or within the United States are prohibited”.

President Trump has also stated that bank accounts overseas could also be blocked along with any property transactions in the US involving Iran, plus foreigners could be banned from entering the US if associated with an Iranian cryptocurrency transaction.

If issued, Iran will control the supply of the cryptocurrency through the country’s central bank backed by the rial, Iran’s national currency. Coins won’t be mined and transaction records will be limited to an inaccessible private blockchain.

Elsewhere in the country are voices that appear to endorse the use of blockchain. Last week, the head of management development department of the Vice Presidency for Science and Technology, Alireza Daliri, commented that blockchain could improve the Iranian economy.

 

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Sanctions-Hit Iranians Seek Economic Alternative in Crypto Mining

Sanctions-Hit Iranians Seek Economic Alternative in Crypto Mining

Iranians are looking towards crypto mining to soften the economic blow caused by recent unilateral US sanctions.

Dwindling economy

Since the recent US sanctions have come into force against the Persian nation, the Iranian government is mostly involved in keeping the economy together to avoid a total collapse. The fresh sanctions have effectively cut off the country’s banking system from the rest of the world. Inflation is at an all-time high and residents have been seeking alternative means to income generation.

The banking sanctions are perhaps the most hard-hitting ones to Iran. Being financially isolated, the most affected are Iranians living abroad, especially young students who now do not have access to money from their homes and are unable to afford tuitions. One of the only ways Iranians can now get money in and out of the country is through cryptocurrencies; demand for Bitcoin in Iran is growing as they can easily obtain, transfer and convert it to traditional currency.

And now, apparently, local residents have also turned their eyes towards mining, with the hopes of generating alternative income from the generation of new Bitcoin.

Profitable Mining

The recent cryptocurrency market crash has made mining a very tough business globally. Many mining operations all over the world have shut down since falling prices mean that mining is not profitable anymore. Iran, however, is a different story altogether.

The news of two Iranian cousins has been making rounds lately. Pedram Ghesemi and Ali Hosseini acquired an Antminer S9 crypto mining rig a few months back and started their mining operations.

The cousins claim that prevailing low prices have affected mining profitability but they are still in the black. This is due to the fact that Iran gives heavy subsidies to its residents in the energy sector and thus the cousins, even with a single mining rig, are able to generate profit.

The Iranian government is also looking into starting a state-backed cryptocurrency to circumvent banking sanctions by the US.

 

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Iranian Students in UK Use Bitcoin to Bypass Sanctioned Banking

Iranian Students in UK Use Bitcoin to Bypass Sanctioned Banking

Iranian students studying at British universities are turning to Bitcoin to circumnavigate imposed sanctions on the SWIFT banking network.

In November, SWIFT suspended several Iranian banks from its service after the imposition of United States nuclear sanctions on Tehran. This has resulted in difficulties for Iranian students in the UK when obtaining cash. Many universities are now advising to return to Iran and return to the UK with sufficient cash funds to pay for courses and living expenses.

For many students, this is wholly impractical, involving crossing borders with large amounts of cash, notwithstanding the problems of personal security in doing so. There seems to be little option for students as universities payment systems can’t overcome the problem caused by the SWIFT sanction.

Consequently, some Iranian students have turned to Bitcoin, which was always intended to be a payment system obtaining their fiat funds through crypto exchanges. Maziar Bahari, editor of Iranwire, a news portal for Iranian citizen journalists based outside the country, suggests that students are now “…using Bitcoin and other cryptocurrencies in order to get money” after struggling to get banking services in the UK.

Its also rumored that the Islamic Republic of Iran itself may be circumventing the US-led economic sanctions in its own small way. The Financial Crimes Enforcement Network, a bureau of the United States Department of the Treasury, claims that “since 2013, Iran’s use of virtual currency includes at least USD 3.8 million worth of Bitcoin-denominated transactions per year”.

It now remains to be seen if Iran goes through with its plans for the imposition of a national cryptocurrency to bypass economic sanctions. The new Iranian state-backed cryptocurrency would be pegged 1:1 with the Iranian rial (IRR) and will initially be used by commercial banks in Iran once the Central Bank of Iran approves the cryptocurrency. Approval is likely, considering this cryptocurrency was developed by the Informatics Services Corporation at the request of the Central Bank of Iran.

International crypto exchanges, including Bittrex and Binance, have also begun complying with the sanctions against Iran and have stopped dealing with Iranian clients. This will make the travails of UK universities’ Iranian students even more complicated moving forward in the 2019 academic year.

 

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USA Sanctions Bitcoin Addresses For The First Time

For the first time in history, the United States has issued sanctions against Bitcoin addresses, held by two Iranians who allegedly helped facilitate a ransomware scheme. The addresses that are banned include 149w62rY42aZBox8fGcmqNsXUzSStKeq8C and 1AjZPMsnmpdK2Rv9KQNfMurTXinscVro9V.

These addresses are controlled by Ali Khorashadizadeh and Mohammad Ghorbaniyan, who are accused of converting Bitcoin into Iranian Rial (IRR) for hackers who seized up people’s computers and demanded ransom payments in association with the SamSam ransomware scheme.

The United States Treasury Department Office of Foreign Assets Control, who issued the sanctions, says those in the compliance and cryptocurrency communities should ban those addresses and investigate any association with those addresses. People in the United States are prohibited from sending Bitcoin to those addresses, and anyone who does is subject to secondary sanctions.

That being said, it is actually impossible to truly sanction a Bitcoin address, due to Bitcoin’s inherent decentralization and cryptographic security. People can still choose to send Bitcoin to those addresses since they cannot be shut down by any government or entity. This is one of the strengths of Bitcoin, it is immutable and no Bitcoin account can ever be frozen so long as only owners control their wallets.

Someone is having fun with these Iranian Bitcoin addresses despite the sanction. A day after the sanction was issued, on 29 November 2018, USD 0.08 of Bitcoin was sent into a sanctioned address from two addresses with the prefixes 1JEWS and 1MOSSAD, an obvious reference to the national intelligence agency of Israel. At the other sanctioned Bitcoin address, three people have sent small amounts of Bitcoin, seemingly defying the sanctions.

In any case, Bitcoin wallet owners can also simply generate new addresses to receive Bitcoin, while some wallets, like Blockchain.com, automatically generate a new address after each deposit. Khorashadizadeh and Ghorbaniyan have the ability to generate virtually unlimited addresses, making the sanctioning of any single Bitcoin address non-meaningful.

 

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Islamic Business Group Calls for a Cryptocurrency for All Muslim Nations

With Iran’s cryptocurrency waiting for approval from the Central Bank of Iran (CBI) the International Business Forum (IBF) has called for a single cryptocurrency for all Muslim nations.

The concept has been kickstarted by Iran’s current move to alleviate its sanctions dilemma, attempting to combat what it sees as the dominance of the US dollar in world trade by launching its own national cryptocurrency.

The IBF, a Muslim-focused business lobby group, claims that the dollar is being used more of a sanctioning tool rather than a purposeful financial device. The Group’s chairman Erol Yarar is calling for changes to the status quo in international trade, commenting:

“In IBF this year we will discuss the term ‘monetary pluralism’ to create a fairer and healthier trade environment…We will make a cryptocurrency system, that will be used for international trade among Islamic countries, a current issue.”

This call for an Islamic cryptocurrency is only possible now that that recent discussions in the Muslim world have satisfied Islamic countries around the world that digital currency use in no way conflicts with Sharia Law. Matthew J. Martin of Blossom Finance, a fintech startup based in Indonesia clarifies the position:

“As a payment network, Bitcoin is halal. In fact, Bitcoin goes beyond what more conventional closed banking networks offer. Unlike conventional bank networks which use private ledgers where there’s no guarantee that the originator actually owns the underlying assets, Bitcoin guarantees with mathematical certainty that the originator of the transfer owns the underlying assets. Conventional banks operate using the principle of fractional reserve, which is prohibited in Islam.”

Yarar argues that an internationally recognized Islamic cryptocurrency for all Muslim countries around the globe is essential in order for the nations adopting it to “undermine and challenge America’s established hegemony in the global financial system”.

Iran has suggested that its new, as yet unnamed national cryptocurrency will bring “enlightenment” to their economy. When the currency is finally issued to banking institutions, plans for testing payments and internal and interbank transactions will be the first task for Iran’s banking sector before it goes live.

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Iran Ready to Deploy National Cryptocurrency as Sanctions Go Into Full Effect

Iran’s national cryptocurrency is ready to be deployed, as the US sanctions go into full effect, which is mostly the reason for the Iranian Rial (IRR) to experience 300% inflation so far in 2018. The goal of this national cryptocurrency is to conduct international business since Iran’s international payment systems have been crippled.

The new Iranian state-backed cryptocurrency will be pegged 1:1 with the IRR, and will initially be used by commercial banks in Iran once the Central Bank of Iran approves the cryptocurrency. Approval is likely, considering this cryptocurrency was developed by the Informatics Services Corporation at the request of the Central Bank of Iran.

This announcement is nearly simultaneous with the re-implementation of sanctions by the United States on Iran starting 5 November 2018. Total blockades on Iran’s shipping, aviation, nuclear industry, and banking have been imposed by Washington. These sanctions are designed to ensure Iran never develops a nuclear weapon.

The crucial international payments network SWIFT has severed ties with Iranian banks. Additionally, due to the sanctions, Bittrex and Binance have stopped serving Iranian customers. Essentially, it is illegal for any company that does business in the United States to also do business in Iran.

The IRR has spiraled into hyperinflation during 2018, with the exchange rate going from 36,000 IRR per USD on New Year’s to 144,000 IRR per USD as of 11 November 2018. This suggests that the threat of sanctions, and now the implementation of sanctions, is severely damaging the Iranian economy.

The national cryptocurrency of Iran is designed to circumvent international sanctions, giving Iranian banks the ability to send money worldwide. It seems likely that when the national Iranian cryptocurrency is launched it will be deemed illegal by a United States Presidential executive order, similar to what happened with Venezuela’s Petro.

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US Financial Crimes Agency Condemns Iran for Use of Crypto to Avoid Sanctions

A US financial crimes regulator has condemned the use of cryptocurrencies by Iran as a way of bypassing economic sanctions, encouraging institutions and US-based exchanges to avoid dealing with the nation.

The Financial Crimes Enforcement Network (FinCEN) has urged domestic cryptocurrency exchanges to be aware of Iranians using cryptocurrencies, including Bitcoin, to circumvent US economic sanctions against the country.

FinCEN’s advisory report published Friday estimates that since 2013, Iran has hosted USD 3.8 million in Bitcoin transactions, with this coming in domestic peer-to-peer (P2P) and exchange transactions alongside third-party countries such as the US. The report advises institutions to use the technology available to monitor open blockchains and investigate ledgers to see if any transactions originate or terminate in Iran.

Despite the relatively low levels of cryptocurrency adoption in the middle eastern nation, Iran’s utilization of cryptocurrency is described as “illicit and malign” in its attempts to ”exploit” the financial system and provide a method of avoiding sanctions.

US-based exchanges were warned of their obligations under the Bank Secrecy Act that require ”appropriate systems” for preventing the facilitation of transactions that may oppose sanction requirements.

Sanctions against Iran were reinstated under President Donald Trump earlier this year when he withdrew the US from the Iran nuclear deal.

Last month, Bitcoin News caught up with IranbyBit, a travel startup that offers its services in Bitcoin, indeed as a way to avoid financial restrictions.

As founder Setare Shabanipour sees it, the more foreigners visit the country, the more likely it is that cynical perceptions of the country will dissipate: ”They can decide for themselves about the country and this can lead to a change of attitude toward Iranians in global communities and markets.”

While US sanctions against Iran are an attempt to target the government in a negative capacity, it cannot be helped that they also harm the whole economy and individual people themselves. Both asset freezes and trade embargoes have taken a serious toll on the Iranian economy and the people.

Shabanipour believes that by promoting Iran as a travel destination, she can help provide part of a solution: “It is inevitable that cultural bridges will form among foreign and local cultures. Such a flourishing market will result in attracting investment and building up more tourism infrastructures in Iran.”

 

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