The annual Electronic Banking and Payment Systems conference in Tehran revealed many interesting things about the future of cryptocurrency in Iran. During the conference, the Central Bank of Iran released an early version of its draft on crypto regulation. This new draft reverses the previous ban on crypto usage but still limits some activities, like using cryptocurrency as a means of payment inside the country.
Crypto is legal …
Iran’s Central Bank has reversed its previous ban and now recognizes and authorizes the global use of cryptocurrency. This includes Bitcoin and Iran’s upcoming state-backed crypto. Upon implementation, the central bank will lift the ban from last April, which prohibited all financial institutions from handling cryptocurrencies.
The cryptocurrency draft also mentions ICOs, tokens, wallets, and exchanges. It recognizes mining as the process of using computing power to generate cryptocurrencies.
… and limited
Iran banned crypto in April 2018 to shield the Iranian rial from further devaluation and inflation. With that in mind, it’s not surprising that these new crypto regulations include some limitations.
As a means of protecting the rial, Iranians are prohibited from holding more than 10,000 euros outside of their bank accounts. The same applies to crypto. It seems the government won’t allow everyday Iranians to become crypto whales any time soon.
Again, this seems like an attempt to protect Iran’s national currency.
The central bank also stated that using global cryptocurrencies as methods of payment inside the country is prohibited. Coined Times contacted Soheil Nikzad, board member of the Iran Association of Blockchain, and asked him to further explain the point of using crypto, but not inside state borders.
There are a lot of fields that can benefit from cryptocurrency usage: Investment, Trade, Remittance, Finance, Technology Transformation etc.
The draft copped widespread criticism — especially from traders — because of these restrictions. On the other hand, the central bank’s deputy governor stated at the conference:
“The draft regulations are still subject to changes based on feedback from the community.”
Buying and mining crypto is okay, but hodling and paying is not
According to the current draft, everyone in Iran will be able to buy and trade crypto on exchanges. They can also mine as much as they like (as long as they don’t hold over €10,000 in cash or crypto).
This could be very profitable, as electricity in Iran is five times cheaper than the world average. On the other hand, it will be interesting to see how much impact this will have on ICOs. After all, we’re talking about huge amounts of money that Iranians can’t hold or use inside the country.
The regulator’s draft also says that only certified banks can operate digital tokens. If Iranians want to trade crypto, they’ll only be able to use licensed crypto exchanges.
With some of the rules, it seems like the Iranian government is protecting the rial from competition. That’s why Iranians won’t be able to use tokens pegged to fiat currencies, commodities, and precious metals as a means of payment.
On the other hand, tokens pegged to the Iranian rial and issued by the central bank will be permitted.
Licensed crypto exchanges will also have to implement KYC (Know Your Customer) and anti-money laundering regulations. They will be responsible for all of the people’s money they hold.
For now, it’s not clear when can we expect Iran to implement this regulatory framework, since it is still in the community feedback phase.
Avoiding the SWIFT ban
Since the reintroduction of US sanctions, Iranians have been unable to make cross-border transactions. This essentially crippled imports and exports, as Iranian companies can’t pay for foreign goods. It also affected tourists in Iran; foreigners coming to Iran can no longer use their bank cards thanks to the SWIFT ban.
With these new regulations, Iran could easily bypass these sanctions and issues with SWIFT. Indeed, crypto could allow the country to create a different route for its cross-border payments.