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In October 2020, the Iranian Central Bank changed their countries' cryptocurrency regulations, thereby declaring bitcoin and other cryptocurrencies official under government order. Iran showed a green flag to the supply of cryptocurrency for its government import funding.
At present, the central bank extended the legal use of cryptocurrencies within the country's boundaries.
The main reason behind the declaration of cryptocurrency to be legal is Iran's financial controls. The international sanctions have hardly hit Iran; thus, cryptocurrency becomes the only way for Iran to operate outside of traditional financial rules.
Iran's Currency History :
With eventful digital currency history, Iranian banks encouraged cryptocurrency blockage. However, the Iranian government blamed these industries for power disruptions, causing a massive effect on the country. Iran declared the shutting down of over 1600 mining operations in the past year, claiming these block mining operations to be illegal.
According to CoinGeek's survey, most of the mining industries were set forth to be illegal due to the crime of using subsidized electricity that the Iran government allocated and meant for only households.
Iran's Currency Present :
Currently, Iranian companies can pay in digital currencies for imports provided the Block Mining is being mined in the country only by the authorized miners. Following up on the latest announcement by the Central Bank of Iran, a new regulatory framework is being set up, allowing electronics and raw material payments to forex companies and banks.
The Financial Tribune filed a report according to which, on Saturday, the Central Bank of Iran (CBI) notified the money changers and banks to amend the regulatory framework for crypto payments. This amendment availed Iran Central Bank to allow money changers and payable banks for imports using mined cryptocurrency.
Use of Cryptocurrencies for paying Imports :
As per the Central Bank of Iran (CBI) announcement, banks and legal currency exchangers can utilize licensed cryptocurrency mined by crypto miners in the country's boundary to pay for imports. To this announcement, the Central bank of Iran says, "Lenders accompanied by the licensed currency exchange offices are being notified about the newly adopted framework for crypto payment."
As suggested and proposed by the CBI and Ministry of Energy, in 2020, Licensed crypto miners were asked to sell their coins directly to the central bank for more profit.
Iran issued 1,000 + licenses to crypto miners, which includes a Turkish bitcoin mining facility. The licenses are issued to grant permission to Power plants in Iran for mining cryptocurrencies. Also, the bitcoin miners have been granted permission to access the electricity generated from the bitcoins and cryptocurrencies legally mined in the nation.
Key features of Iran's Authorization pay for imports via cryptocurrency :
• Iran's cabinet has amended the digital assets in 2020, thereby allowing cryptocurrency to be used for import funding by the Central Bank of Iran, started by an article in The Islamic Republic News Agency
• The amendment of cryptocurrencies such as bitcoin had been proposed by the CBI per the cabinet previously.
• The amendment means only legally mined cryptocurrency in Iran could be used/ exchanged for fund imports from other nations.
• A direct supply of cryptocurrency to the CBI by the miners must be followed within an authorized limit.
• The direct supply of cryptocurrency would be based on the amount of subsidized energy used per miner followed by instructions published by the Ministry of Energy.
• The importance of cryptocurrency in the country Iran is in the limelight because the nation suffered from an economic breakdown due to the combined effects of U.S. sanctions and the coronavirus pandemic.
• The Iran government is still in a tough jurisdiction because though mining had been legalized last year, yet the government itself is heavily regulating the industry.
• As suggested by the Iran government, the use of bitcoin/ cryptocurrency for import payments would serve as a helping hand for the nation to avoid sanctions imposing limits on Iran's access to the dollar.
Is Iran going to build up a Bitcoin Reserve?
The latest amendment by the Iran government is forcing regulated miners to supply their BTC to the central bank; thus, many Bitcoin communities theorized that the country is building up a bitcoin reserve.
But according to strong sources, the Iranian government is not interested in acquiring the bitcoin reserve. Furthermore, most of the world's central banks showed very little interest in accepting bitcoin because of its risks and fluctuations.
The government might establish a system for cryptocurrency management just like the forex management system, thereby controlling the country's exchange rate for foreign currencies. But at no cost will the government be building up a reserve of foreign currencies through Bitcoin.