Ways of Regulating Cryptocurrency

EghtesadOnline: The research arm of Iran’s Parliament has dedicated its latest analytical study to virtual currencies, once again calling for calculated and well-assessed regulations to employ them in the economic cycle of the country.

News ID: ۷۴۵۹۶۹

04 September 2018

In the study published on the official website of Majlis Research Center on Sept. 2, the think tank called for regulatory measures that include anti-money laundering probes, taxation and stock market regulation of virtual currencies as viable financial instruments.

This is the second study by the parliamentary entity in two months. It had previously published another study on July 20, calling on a host of top 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.

In its new study, MRC first distinguishes virtual currencies from cryptocurrencies and digital currencies. It then reviews statistics and trends concerning these currencies and analyzes a report by the European Parliament’s Committee on Economic and Monetary Affairs on their opportunities and threats, in addition to surveying the state of virtual currencies in the European Union, according to Financial Tribune.

MRC reviews policies and regulations devised by the US federal government and then goes over how a number of other nations, such as Ecuador, Venezuela and Russia, have dealt with this phenomenon.

The think tank goes on to assess existing regulations in Iran. It first analyzes major components of the country’s anti-money laundering law that was first devised in 2008 and has since been amended.

“With respect to global experiences, it seems that the High Council of Anti-Money Laundering is responsible for devising legal commitments to control centers exchanging virtual money with the country’s currency,” MRC said.

It points out that the AML entity issued the order to ban the exchange and transaction of all cryptocurrencies in Iran’s financial institutions, which was officially notified to the banking system on April 22 by the Central Bank of Iran.

According to MRC, “experiences of other countries and their comparison with the laws of our country show that the Law of Direct Taxes approved [in 2014] by the parliament will be applied to levy income taxes on virtual currencies”.

Taxation, Bourse

The research center then discusses in detail the technicalities of how the Iran National Tax Administration can employ a number of articles in Iran’s tax laws to virtual and cryptocurrencies.

MRC discusses virtual currencies in relation to bourse and commodities exchange laws of Iran, which refer to the High Council of Securities and Exchange as the deciding entity. Therefore, it reasons that the council will have the authority to “categorize virtual currencies transferable to real world money as financial instruments” and decide on investments in virtual currencies.

It noted that several of the sources used for its research have referred to virtual currencies as examples of laissez-faire capitalism, but adds that “the untamable competition of virtual currencies goes beyond a technical competition”, as they have created countless new possibilities.

In designing a national virtual currency, for which Iran has two ongoing projects, the MRC says “employing open source and transparent protocols can prove effective in gaining public trust and participation”. Not many technical details have been disclosed about Iran’s national virtual currency projects, but it is known that they employ private blockchains and won’t be open to the public at least in the foreseeable future.

In conclusion, MRC probes the major pros and cons of virtual and cryptocurrencies and says that through an active cooperation, the aforementioned AML, tax and capital market regulating entities can overcome AML, speculation and tax evasion concerns.

“Suitable efforts can make the virtual currency market roll on the rails of the country’s policymaking,” the think tank concludes.

It does, however, warn that virtual currencies must not be given a free rein and the government must disseminate all their negative points to the general public.