It’s been a tug of war between cryptocurrencies and the legacy financial system in Iran. Iranians took to crypto early on, and this didn’t go well with the government. It banned the industry as a whole despite pleas from the crypto community. Finally, the tone has changed. Today, the Central Bank of Iran (CBI) released a draft of regulations that effectively nullify its earlier crypto ban. The regulations are still quite some way from making Iran a crypto hub. However, they are a big first step towards introducing crypto to the people.
Elsewhere, the United Arab Emirates and its neighbor Saudi Arabia are pushing forward with their joint national crypto project. Dubbed ‘Abber’, the project is working on a cryptocurrency that will initially focus on remittance between the two countries. The pilot will involve a few commercial banks and if successful, it will be rolled out nationally.
Come One, Come All
Since Donald Trump ascended to power, Iran has had it rough. President Trump hasn’t been Iran’s biggest fan and he imposed even tougher sanctions on the Islamic state. It was only a matter of time before the oil-rich country turned to the one financial system that can’t be censored; cryptocurrencies.
Today, the CBI published a draft of its regulations on cryptocurrencies dubbed Version 0.0. The regulations aim to define the boundaries of crypto operations in the country and allowing traders to trade within the confines of the law. The announcement was made on the eve of the Electronic Banking and Payment Systems Conference, an event whose theme this year is incidentally, ‘blockchain revolution.’
The draft recognizes and authorizes global cryptos such as bitcoin and ether. It also recognizes central bank digital currencies (CBDCs), which the CBI expects to delve into soon as well as regional cryptos. It further recognizes and authorizes crypto exchanges, crypto wallets and initial coin offerings. For the first time, the crypto mining industry was also recognized as an industry.
The draft will go a long way in legitimizing cryptos in the country. Last April, the Iranian government had banned cryptos, warning all commercial banks against engaging in business with crypto firms. At the time, the government viewed cryptos as a risk of capital flight, fearing its citizens would put all their money in crypto which could have a far-reaching effect on the economy. Back then, its national currency was experiencing high inflation and the government feared cryptos could further compound the problem.
Not yet Time to Pop Champagne
Despite the great initiative by the Iranian government, it’s not yet time to pop the champagne. For one, using global cryptos as a payment method in the country is prohibited. This means that despite the law allowing citizens to trade cryptos, they have to convert them to fiat currency in order to pay at retail establishments.
The crypto community in Iran is, as expected, unhappy about this. Speaking to Al Jazeera, one Iranian crypto trader stated:
The ban on using internationally accepted cryptos as payment methods can negatively affect the work of me and many like me
The draft also bars Iranians from holding large amounts of global cryptos such as bitcoin. This law is not unique to cryptos, however, as Iranians are also barred from holding more than 10,000 euros. This aims at protecting the national currency against losing value.