Dependence on Cryptocurrencies in Iran

Oct 19, 2018   |   by Jamesa Brown   |   Current Events
Background

Two years ago, in 2016, United States sanctions on Iran were lifted. This year, the U.S. has revived the sanctions, and President Donald J. Trump has withdrawn from the 2015 Iran nuclear deal, also known as the Joint Comprehensive Plan of Action (JCPOA), due to what he deems as “disastrous flaws” that could pose a threat to U.S. national security. The first of the two sanctions that the Trump administration have revived in May of this year restricts Iran’s purchase of U.S. currency, Iran’s trade in gold and other precious metals, and the sale of auto parts, commercial passenger aircrafts, and related parts and services to Iran. The second set of sanctions restricts the sale of oil and petrochemical products from Iran.

An immediate effect of these sanctions is the drop in worth of the Rial, the Iranian national currency. Once the sanctions were reinstated, many comfortable Iranian families faced hardships in purchasing foods and other necessary goods for themselves. The absence of the U.S. in the JCPOA has also forced pressure onto Iranian President Hassan Rouhani. One news outlet has gone so far as to deem his nuclear deal with world power leaders as “a noose around his neck that hard-liners gleefully tighten.”

The Government Backed Coin

On August 29, nearly one month after Iran was sanctioned, news of a national Iranian cryptocurrency surfaced onto global news outlets. According to the Iranian news agency, IBENA, the Central Bank of Iran had revealed finalized details of an “indigenous cryptocurrency” that will be “backed” by the Iranian Rial currency. The Central Bank also informed IBENA that this Iranian cryptocurrency was going to be similar to Bitcoin because “transactions are carried out on an online ledger called a blockchain”. Despite this single singularity, people would not be able to mine it because the infrastructure would be private.

This decision by the Central Bank to become informed with cryptocurrencies and how to mine them was never seriously considered before the U.S. sanctioning. In fact, Independent, a news outlet based in the United Kingdom, reported that the Central Bank had “previously been dismissive of Bitcoin and other cryptocurrencies”. An Iranian digital currency is seen as a possible solution to the issue of economic disruption that the sanctions placed upon the country. Along with this realization of a possible national cryptocurrency, on September 4, Bitcoin.com reported that the Central Bank had begun to recognize the mining of cryptocurrencies as a profitable industry. By September 11, every cryptocurrency-related news outlet reported Iran’s recognition of cryptocurrencies along with Venezuela’s and North Korea’s newfound faith in it. All of the countries that are now willing to try cryptocurrencies are currently facing U.S. sanctions.

Moving Forward

The global cryptocurrency environments are waiting to see the outcome of Iran’s national cryptocurrency and the new ground that all cryptocurrencies will take in the country due to the U.S. sanctions. There are many optimistic people who hold onto their faith in cryptocurrencies for the future of the country. Others note that more work outside of cryptocurrencies should take place in order for Iran to gain back its strength. Iranian leader, Ayatollah Khamenei stated that “with regards to the economy, there is need for full force, large-scale and proficient work." What kind of work this may equate to is still only known by the government officials of Iran.

Jamesa Brown