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Banks in Iran Barred From Dealing in Bitcoin And Other Cryptocurrencies

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Banks in Iran Barred From Dealing in Bitcoin And Other Cryptocurrencies

According to a report in the local media outlet, IRNA which was quoted by Reuters on Sunday, April 22, 2018, Iran has become the latest country to have its apex bank prohibit other banks from engaging in crypto transactions. The central banks of India, Nigeria, and Pakistan are among some of the others to have issued such a ruling.

According to a circular issued by the Central Bank of Iran (CBI):

“Banks and credit institutions and currency exchanges should avoid any sale or purchase of these currencies or taking any action to promote them.”

The CBI believes that cryptocurrencies have the potential to support money laundering and terrorist funding activities, hence the need for the ban. In December 2017, the Iranian High Council of Cyberspace (HCC) announced its acceptance of bitcoin with strict regulations.

The acceptance of bitcoin came after a year of massive “dollar dumping” which resulted in rumors that Iran was looking to embrace bitcoin as a replacement for fiat. In February 2018, reports emerged that the CBI was looking to regulate the crypto market which was viewed as being “highly unreliable and risky.”

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Iran’s Currency Crisis

The proximity of the ban to the country’s recent currency reforms has suggested that it could be part of a wider plan to revive the rial (the Iranian currency) which has been on the decline in recent times due to reports of renewed U.S.-led economic sanctions. As part of its efforts, the CBI has issued a ban on money transfers and swaps, unifying its official and open market exchange rates. The apex bank has also issued restrictions on foreign currency holding, with citizens prohibited from holding more than $12,500 in cash.

In 2012, the U.S. imposed economic sanctions on Iran over its nuclear program which led to a banking blockade. The country’s banks were barred from the SWIFT network for about four years until former U.S. President, Barack Obama, lifted the sanctions in 2016.

May 12, 2018, is the deadline for the renewal of the waiver and there are not any concrete indications as to what the current U.S. President, Donald Trump wishes to do. At the start of the year, President Trump issued an ultimatum to Germany, France, and Britain to fix “the terrible flaws in the Iran nuclear deal.”

Possible Crypto Plans

Despite the crypto ban, there are indications that Iran may follow in the footsteps of Venezuela by issuing its state-owned cryptocurrency. Just like Venezuela, Iran might be hit with severe economic sanctions and cryptocurrency might serve as a means of circumventing those restrictions.

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