The Iranian parliament recently met to review its currency smuggling laws to properly define the concept of currency smuggling and punish offenders. However, the proposal does not cover currency smuggling, but also extends to crypto exchanges.
While most exchanges operate outside of Iran, the proposed amendment seeks to license exchanges, which could further stifle the growth of the crypto industry in the country.
Iran Mandates Licensing Regime for Local Crypto Exchanges
According to ArzDigital, on Monday (May 18, 2020), the Islamic Consultative Assembly in one of its sessions proposed to amend the law on smuggling of currency and goods. In the amendment, the lawmakers stated that bitcoin and other cryptocurrencies will be subject to the country’s currency smuggling and foreign exchange rules.
With the proposal, crypto exchanges will have to obtain an operating license with the Central Bank of Iran and follow strict guidelines. One of the cases considered a violation of the rule includes:
“Carrying out foreign exchange brokerage services inside the country for persons abroad, without having the permission to perform exchange operations from the Central Bank. The broker is the person who receives the currency for the currency traded in the country.”
The government’s proposed amendment seeks to curb capital flight. Failure to comply with the directives will earn defaulters a hefty fine and sanctions. While the lawmakers are placing cryptocurrencies under the proposed amendment, it is not clear how the government will mandate exchanges to obtain licenses. This is because some Iranian crypto exchanges are located abroad.
Iran’s attitude towards the nascent technology has not been entirely smooth. Back in July 2019, a top official of the Central Bank of Iran ruled bitcoin trading in the country as illegal because of the associated risks. Also, a draft crypto regulation by the government early in 2019 banned the use of bitcoin and other virtual currencies as a payment method in Iran.
Crypto Adoption in Iran Amid Crippling Hyperinflation
While bitcoin trading activities are prohibited in the country, the cryptocurrency mining industry continues to flourish in Iran. The country’s low electricity rates have attracted lots of bitcoin miners to the jurisdiction looking for cheap energy.
According to a report by Blockonomi in July 2019, the government of Iran officially recognized the crypto mining sector as industrial activity in the country, with miners also having a special electricity tariff.
The government later in Septemeber 2019 announced a tax exemption for bitcoin miners who bring their foreign earnings home. Early in 2020, Iran’s Ministry of Industry, Mine, and Trade issued 1,000 licenses to bitcoin miners to legally carry out mining activities in the region.
Iran’s economy has continued to plunge over the years, with the Gulf Nation struggling with serious hyperinflations. The current official exchange rate stands at 42,000 rials to $1, with the black market’s exchange rate being several levels higher.
In a bid to manage the crippling economic situation, authorities in Tehran redenominated the rial by removing four zero digits and changing it to toman, making each toman equal to 10,000 rials.
The Gulf Nation has also been blocked from the international financial scene, following the strict sanctions placed by the U.S. President, Donald Trump. Consequently, Iran has sought cryptocurrency to circumvent the sanctions. There were reports about the government looking to develop its own digital currency.
Back in December 2019, Iran’s President Hassan Rouhani during a summit in Malaysia called on Islamic nations to collaborate to create a Muslim cryptocurrency. According to Rouhani, such currency will help to remove them from the dominance of the U.S. economic hegemon. Also, an Iranian commander asked the country to use crypto to circumvent U.S. economic sanctions.
