What’s the buzz about Iran importing using crypto?
The semi-official news agency, Tasnim reported on 9th August 2022 that Iran has made its first official import order using cryptocurrency. The order is worth $10 million. Struggling through decades of economic sanctions, Iran can turn around its economy using cryptocurrencies. This is the first-ever event when a country has officially used crypto for importing goods. However, there is still a long way to go.
Reuters reports that Deputy Minister declared that Iran successfully completed import order registration using cryptocurrency. Iran’s Trade Promotion Organization (TPO) head Alireza Peymanpak reports the order was worth $10 million. However, the minister didn’t disclose which cryptocurrency was used for transactions.
Cryptocurrencies are a relatively newer concept in the world. The countries have a different opinions about it. Some countries have adopted it with open hands, while some are still evaluating its pros and cons and some have outrightly banned it. One of the main reasons for countries to bring cryptocurrencies regulations is to curb illegal trade and bypassing of economic sanctions.
Even though countries like EL Salvador and the Central African Republic have adopted Bitcoin as a legal tender but Iran is the biggest economy to officially use the cryptocurrency.
What’s the issue with Iran importing using crypto?
Iran agreed to limit its nuclear programme in exchange for sanctions relief from the United States, the European Union, and the United Nations in 2015. But in 2018, then-President of the United States Donald Trump pulled out of the nuclear deal and reinstated harsh sanctions, which led Tehran to begin violating the agreement’s nuclear limits approximately a year later.
Iran has been in economic trouble due to the harsh sanctions imposed by the US. The use of cryptocurrency for imports can be seen as a bypass of the economic bans. Further, by using cryptocurrencies Iran can improve their economic condition and can also fund its nuclear ambitions which will again stir the peace talks.
However, funding the nuclear programme, for now, is unlikely as the EU has stated on 8th August 2022, that it will put forward a final text to revive the 2015 nuclear agreement with Iran. This statement came after the four-days long indirect meeting between EU and Iranian officials in Vienna.
Meanwhile, Venezuela which is also facing economic sanctions by the US is also active in the crypto space. President Maduro presented a use case of crypto to enter the global market avoiding the sanctions.
Is cryptocurrency legal in Iran?
One of the first questions that may come to your mind is whether crypto is legal in Iran or not. The answer to the question can be found in a televised interview with Ali Salehabadi, governor of the Central Bank of Iran (CBI).
Ali stated that selling or purchasing cryptocurrency in Iran is illegal. However, crypto mining and using them for imports is legal and allowed. But here is a catch also. Iranian authorities passed a regulation two years back that only persons with official permission can mine crypto. Therefore, anyone living in the state can’t set up a mining node. By January 2021, Iran’s Ministry of Industry, Mine, and Trade had issued over 1,000 mining licenses.
Further, he informed that the Central Bank of Iran is also planning to introduce a crypto-rial or digital-rial. This digital currency shall be used akin to the fiat currency rial.
To give you a context of mining in Iran, 4.5% of all the bitcoins are mined in the country. Blockchain analytics firm Elliptic estimates that Iran’s bitcoin mining generates revenue of approximately $1 billion per year. The reason for the high amount of mining is because of the availability of cheap power. Iran is rich in fossil fuels and hence electricity generation is cheaper.
It is also to be noted that a mining machine consumes as much energy as 24 houses. However, the relationship between miners and Iranian authorities has been bittersweet. Many times the authorities have imposed bans on crypto mining stating the power shortage.