Fate of Cryptocurrency in Iran Hangs in Balance

EghtesadOnline: Virtual currencies are slowly but steadily gaining traction across the world, as many are lured by their decentralized and somewhat exotic qualities once they get past the initial opaqueness.

News ID: ۷۴۴۱۲۴

23 October 2017

Iran is no different, bar the fact that progress has proved more languid as a result of uncertainties.

Bitcoin, the most famous of cryptocurrencies created in 2009, has made many headlines after the Great Recession with its record-breaking ascents and is currently priced just north of $5,200. The peer-to-peer system of payment also retains its most-popular status among virtual currencies in Iran where it is traded along with other virtual currencies by several websites.

Iranians are currently able to purchase a bitcoin for about 210 million rials while all transactions take place instantly through Shetab, the nation’s integrated payment network, Financial Tribune reported.

Not unlike many other monetary policymakers elsewhere, the Central Bank of Iran has yet to take an official stance on cryptocurrencies and has adopted a wait-and-see approach while it conducts further studies.

However, in unveiling its policies relating to the operation of fintechs just over a week ago, the regulatory body also announced that it will reveal its regulatory framework  about cryptocurrencies and blockchain technologies by the time the first half of the next fiscal year ends in September 2018.

CBI Governor Valiollah Seif on Tuesday confirmed that the matter is being studied and the results will be announced in the foreseeable future.

While it remains to be seen what approach will be adopted by the central bank, Nima Amirshekari, the head of Electronic Banking Department at the Monetary and Banking Research Institute, said the general air surrounding cryptocurrencies is positive at the central bank.

“CBI views it as something that can be controlled and does not see it as multi-level marketing or a pyramid scheme,” he told Financial Tribune.

Virtual currencies have been occasionally branded as such in Iran by those with insufficient information about how they work and where they originate.

But there is a caveat. According to Amirshekari, China and Japan initially had a similar view about popular virtual currencies, but then opted to come up with their own version and block others.

Iran may choose to come up with its own national cryptocurrency as the technology is open-sourced and it could have specialized or broad uses based on its mandate.

Indeed, CBI’s deputy for innovative technologies, Nasser Hakimi, recently referred to bitcoin in Iran as an “opportunity”, saying the idea of a national virtual currency has been pitched and is under evaluation.

He opines that certified bureaux de changes must start dealing in bitcoin where possible while such virtual currencies can also assist traders who are unable to open lines of credit as a result of banking hurdles.

As the MBRI expert notes, the Bank for International Settlements, which serves as a bank for central banks, has advised central banks of the world to take a stance with regard to virtual currencies sooner rather than later and transform a portion of their nation’s liquidity into virtual currencies to be used by traders among others.

What is more, the managing director of the International Monetary Fund has recently directed more attention toward virtual currencies and called on the world to view it with a broader mind.

“In many ways, virtual currencies might just give existing currencies and monetary policy a run for their money. The best response by central bankers is to continue running effective monetary policy, while being open to fresh ideas and new demands, as economies evolve,” Christine Lagarde told the Bank of England conference in London late September.

Lagarde had also referred to “dollarization 2.0” where a number of economies might see a growing use of virtual currencies instead of adopting the currency of another country, such as the US dollar.

Iran could also arguably enter that list, especially since it is already striving to sideline the greenback in its financial reporting and foreign deals.

Reza Qorbani, chief executive of Way2Pay Network, a media outlet specializing in payment technologies, banking and fintechs, is also of the belief that Iran will be missing out on a significant chance if it fails to catch up with the bitcoin craze.

“The current resistance toward bitcoin and other cryptocurrencies is a result of psychological factors because they were recently established and are not tangible,” he told Financial Tribune.

According to the expert, financial policymakers must make clear their stance on virtual currencies so that it can come out of its current in-the-shadows state and people can use it freely.

Although it seems that cryptocurrencies have been generally received positively in Iran with people and media eager to hear of CBI’s take, the policymaker remains wary as it is considering its shadier aspects.

Chief among them are money laundering concerns, especially since Iran has been seeking and working toward a better standing with international organizations such as the Financial Action Task Force.