Majlis Think Tank Calls for Regulating Cryptocurrency

EghtesadOnline: The research arm of Iran's Parliament has conducted a study on cryptocurrencies, advising a host of decision-making bodies to join forces and employ the potentials of digital money and blockchain technologies through constructive regulations to foster the economy and circumvent US sanctions.

News ID: ۷۴۵۶۶۵

21 July 2018

The study, titled "A prelude to regulating cryptocurrencies in Iran's economy", was published on the official website of Majlis Research Center. It probes the history of cryptocurrencies' advent, variety of virtual currencies, markets, pros and cons and regulatory frameworks.

The center summarized the issue and offered solutions tailored to Iran and called for swift action, especially since external pressure against it is only liable to increase after US President Donald Trump's pullout from the Joint Comprehensive plan of Action.

MRC wrote that in light of the difference between cryptocurrencies and traditional currencies, regulators must "enact regulations in response to this type of currency in the country as soon as possible" and make the pros outweigh the cons for Iran, according to Financial Tribune.

The Central Bank of Iran on April 22 officially prohibited all financial institutions from handling cryptocurrencies. The stated reason was money-laundering fears, but officials have since conceded that the country's currency crisis was the main driver of the abrupt decision.

However, CBI's deputy for innovative technologies, Nasser Hakimi, has since reassured that the ban is not a final stance of Iran and that its regulatory framework for cryptocurrencies will be disclosed by the end of the first half of the current fiscal year on Sept. 22 as previously announced.

Under the circumstances, MRC believes, "all related entities", including CBI, Parliament, Securities and Exchange Organization, National Center for Cyberspace, Ministry of Intelligence, Judiciary, Economy Ministry, Iran National Tax Administration, Money and Credit Council, High Council of Anti-Money Laundering, Customs Administration, Headquarters for Combating Goods and Currency Smuggling and FATA (cyber police) must join forces.

Their goal should be to devise a joint workgroup as soon as possible to devise a draft regulation and ratify it to prevent potential harms, it said.

The think tank also called on the aforesaid entities to refrain from making snap decisions that would prove counterintuitive and create barriers for blockchain development in Iran. It cautioned that any delay will only create challenges, as they will have to revise regulations multiple times.

MRC said that since many Iranians, including policymakers, have scant information about cryptocurrencies, they only see the challenges. It called for avoiding unilateral calls to completely block these currencies since it will only ruin some operating businesses. It noted that it is recommending giving full rein to cryptocurrencies, but only seeks to mitigate their challenges so that they can be best used to help Iran's economy.

MRC advised the state entities to present solutions to better overcome challenges and harness the benefits of cryptocurrencies to the general public because much of the risks are first directed toward individuals and then spread to the wider economy.

"In light of the complexities of each cryptocurrency, they must not all be regulated by one law," it said.

The think tank said that, for instance, they can be divided into three categories: Public blockchain including those that can be freely mined are similar to commodities such as Bitcoin and Ethereum; Private blockchain including Iran's in-the-works national virtual currency or digital currencies like cryptoruble or tether that are usually created by a centralized entitiy; and initial coin offerings or tokens based on cryptocurrencies that are similar to bonds and stocks.

MRC pointed out that various measures could be considered in case of cryptocurrencies, including the minting of currencies by private and public sectors, trading of cryptocurrencies with fiat currencies, employing cryptocurrencies in micropayments and maintaining cryptocurrencies that includes the creation of electronic wallets. Each of these activities must be regulated separately, the center warned.

Bypassing Sanctions

Last but not the least, the center pointed out that "according to various experts, one of the ways of avoiding the adverse impactof the reimposition of cruel sanctions against Iran's economy is to employ cryptocurrencies to facilitate the country's transactions on an international scale.

MRC points out that even the US is very much aware of this, as it has specifically referred to the issue in Article 8 of the infamous Countering America's Adversaries Through Sanctions Act.

In this light, the center calls for the targeted use of cryptocurrencies to circumvent US sanctions.