Cryptocurrency News

Crypto community awaits Iran decision on regulation

The Central Bank of Iran has published a 13-page report on the legality of cryptocurrency. To be sure, the document has caused alarm among the crypto community in the country. Many fear the proposed rules may make it more difficult for businesses and individuals to work together in the crypto space.

Report on cryptocurrencies recently published

The Iranian government recently published a report recommending regulations for the crypto industry. The authorities published the draft document in January of this years, several months behind schedule. The the use of global cryptocurrencies and other tokens as methods of internal payments will now be prohibited.

In addition, the regulations require cryptocurrency exchanges to obtain permits if they wish to trade. More importantly, the document frequently uses the word “prohibited”. This is alarming because it suggests the authorities view digital assets as a threat. As a result, the proposed regulations could open up companies and users to criminal prosecution.

The original regulation draft had stated that it intended to organise and define the boundaries of cryptocurrency operations in Iran. The hope was that it would have enabled crypto traders to plan ahead for any changes.

In addition, the Bank of Iran also approved the following:

  • Bitcoin – as well as Iran’s own cryptocurrency and any regional cryptos – may operate in the Islamic Republic.
  • Initial Coin Offerings (ICOs) and tokens are deemed acceptable forms of currencies.
  • The infrastructure supporting cryptocurrency trading will include hot and cold wallets, exchanges, and crypto mining.

Contradictions in Iran’s crypto approach

In effect, the local community found several issues in the proposed regulations. The report provoked an immediate reaction and resulted in a concerted effort to improve the document.

In response to the report, more than three dozen members of the cryptocurrency community sent their own proposals to the Central Bank of the Islamic Republic of Iran. In a joint statement, they highlighted 51 regulatory issues. Recommendations have now been delivered to the Central Bank of Iran for review.

The Iranian government has recognised cryptocurrencies and digital asset trading as an important part of its strategy for dealing with US sanctions. However, inside the Islamic Republic, cryptocurrencies remain prohibited as a means of payment. Evidently, Iran has a contradictory attitude towards cryptocurrency.

Many waiting to see what happens

Indeed, the industry is unregulated and the currency remains decentralized. But, despite the restrictive regulatory policy, Iranian authorities are still eying the potential use of cryptocurrencies. One reason is that it operates independent of traditional geographic borders.

Clearly, sanctions will remain in place for now. In fact, they cannot be overcome entirely with digital currency. Granted, this draft could overturn the April 2018 ban on using crypto as payments in Iran.

At the time the ban was issued, the measures were intended to prevent further pressure on the Iranian rial. This was in response to the looming US sanctions.

The central bank and the crypto community are not the only parties following the regulation updates in Iran. The Securities and Exchange Organization and The Ministry of Energy and Customs Administration are also invested in the regulation of cryptocurrency in the Islamic Republic.

US sanctions clearly affecting Iran

While the industry’s proposed ammendments are being considered, the cryptocurrency community in Iran remains in a degree of suspension as they await the government’s decision.

Iran’s dual exchange rates were unified in April 2018. At the same time, the government introduced a ban on using cryptocurrency as acceptable payments. The goal was to ease pressure on the rial due to the threat of US sanctions. The following month, the country’s nuclear deal with the US was scrapped by the Trump administration. At the same time, the US government announced sanctions against the Islamic Republic of Iran. As a result, the rial plunged in value.

Obviously, this led to a currency crisis for Iran. Similiarly, many people in the crypto community were left with uncertainty. More importantly, there was also a purge of currency traders, some of whom were subjected to death penalties.

Proposal leaves some hopeful and others disappointed

Proposed regulations in Iran represent a step forward for the crypto community. Previously, currency traders experienced a freeze on their trading and projects. However, the new plan also disappointed many who had hoped that the regulation of cryptocurrency in Iran would allow more freedom.

Admittedly, the regulations bar the accumulation of large amounts of cryptocurrencies in Iran. This mirrors the limit on people holding more than 10,000 euros.

Ban on cryptos as payment largely seen as negative

For the time being, payments using cryptocurrencies continue to be banned. Despite crypto payments operating globally, the restrictions stop Iranians from benefiting from a cheap and quick way of making payments for goods.

In January, cryptocurrency trader Perhman Azhdarpour told Al Jazeera: “The ban on using internationally accepted cryptos as payment methods can negatively affect the work of me and many like me. We were hoping the central bank’s stance would not again restrict the use of bitcoin and other cryptocurrencies in any way.”

However, Iran’s information technology minister, Mohammed Javad Azari Jahromi, believes the draft is a move in the right direction. Although, he acknowledged that restrictions might not be “well received by crypto players”, according to Al Jazeera.

Central Bank sees value in crypto community

The Central Bank has moved to reassure the crypto community that the draft is subject to changes. In fact, it will consider the feedback from the community as it moves forward. Soheil Nikzad, Board Member of the Iran Association of Blockchain, revealed that about $10 Million worth of transactions already take place daily in Iran.

Indeed, cryptocurrency ratings continuing to show a general boom in daily user transactions.  In addition, the value of cryptos continues to rise. Apparently, this is despite a government-regulated crypto market in Iran.

Clearly, the ethos of cryptocurrency is still a non-regulated space. The industry continues to be a non-centralized digital peer-to-peer payments system. Still, how much of that ethos Iran will embrace remains to be seen.

Iran crypto image licensed via Shutterstock.

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