It is believed that Tehran’s cryptocurrency plan is being aided by Russia as part of a collaborative attempt to build a new system for global financial transactions to help their respective banks to become “sanctions resistant.”
President Trump announced in May that the U.S. planned to exit the Iran nuclear deal. This forced Tehran to face being shut out of the global financial system. The sanctions that removed Iranian banks from the global SWIFT banking system and impeded their ability to transfer funds internationally were what drove Iran to the negotiating table back in 2013.
Still, after the sanctions were lifted two years ago, Iran’s economy has faltered, affecting ordinary Iranians as the rial plummeted since the beginning of 2018. Many Iranians have begun purchasing cryptocurrencies like Bitcoin in an attempt to preserve their savings.
Iranian senior officials have discouraged citizens from using Bitcoin to prevent capital flight, and have reportedly restricted access to foreign crypto exchange websites. The Iranian government wants a cryptocurrency it can control, not the decentralized Bitcoin protocol.
While Iran’s central bank has been doing academic research on blockchain technology since 2017, only in recent months have officials publicly touted the idea of a state-based crypto.
Iran’s department for science and technology signed an agreement to work with the central bank on cryptocurrency technology. the country’s Information and Communications Technology Ministry also signed an MOU with Iran’s national library to use blockchain technology to digitize the country’s archives.
The Iranian and Russian press reported in May that a senior Iranian economic official met with his Russian counterpart in Moscow. Subsequently, the Iranian official announced that Iran’s central bank would develop proposals for a state-backed cryptocurrency. Russian media also reported that the two countries planned to reconvene to discuss interbank cooperation in July.
Venezuela tried to launch its own cryptocurrency earlier this year. Russian entrepreneurs assisted Venezuela’s Maduro regime in an effort that has since floundered. Some media sources report that the Kremlin oversaw the Venezuelan crypto project.
Officials say that Iranian cryptocurrency would be backed by the rial and launched in three months, initially for use by domestic banks.
There are concerns that Iranian access to non-state cryptocurrencies will be blocked. Iran has previously shut down the internet within its borders for brief periods of time.
It is also a grave concern that authoritarian regimes are seeking an alternative financial system where there will be no repercussions for funding corruption and oppression.
Perhaps the U.S. Treasury department should reinforce the message to U.S. persons and institutions banking with the U.S. financial system that providing financial value of any kind to the regime in Iran violates U.S. sanctions, whether via dollars or cryptocurrencies.
The Treasury Department has already said it is prepared to add digital currency addresses owned by sanctions targets to its blacklist. Designating addresses would encourage financial institutions to carefully ensure that sanctions evasion schemes do not enter the crypto space.
The Group of Seven (G7) countries must also investigate coordination among regimes like Russia, Venezuela and Iran, and strategize ways to foster crypto/blockchain innovation that truly enhances economic and political freedom.
Crypto schemes that fund oppressive regimes tarnish the technology’s reputation. The future is open to crypto/blockchain space, and it would be implemented with the highest ideals.