Iran Mercantile Exchange Ready to Launch Cryptocurrency Trade

EghtesadOnline: Managing director of Iran Mercantile Exchange says the commodity bourse is ready to host the trade of cryptocurrencies and also tap into the potential of blockchain technology in enhancing commodity trade.

News ID: ۷۴۶۸۴۴

05 March 2019

"Whether or not cryptocurrencies can be traded on the IME should be decided by the relevant authorities. We have conducted our own studies both in the area of Islamic jurisprudence (fiqh) and legality with help from experts and are ready to use it in the bourse," Hamed Soltaninejad told the Financial Tribune.

The Central Bank of Iran unveiled a draft of its cryptocurrency policy in January, calling on experts and stakeholders in virtual currencies to comment and send their views.

In the draft policy, the CBI said issuing tokens backed by assets other than hard currency is outside of the purview of the  CBI and should be taken care of by the Securities and Exchange Organization, according to Financial Tribune.

The draft rules say that asset-backed tokens can be traded in Iran Mercantile Exchange. Tokens backed by no assets can also be traded on IME.

"From studies, we have conducted both on cryptocurrencies and blockchain technology, our goal is [also] to tap blockchain for example in discovering the base price," Soltaninejad added.

When it comes to discovering the base price, often disagreement arises among market players as to which base price they should accept.

"[Blockchain] technology can be used for supervisory affairs and determining the base price and can be effective in the bourse.”

IME Goals

In the current fiscal (ends March 20), the IME has worked to promote agricultural products on the exchange, including creating a platform for saffron  trade via "negotiated prices."

Close to 66 tons of saffron was traded in the IME physical ring and 27 tons were traded in the form of certificates of deposit.

Petrochemical products trading on IME registered an increase of 15% in volume and 92% in value during the 11 months to February 19. Oil products saw their trading value increase by a whopping 116%.

For the coming year, IME plans to launch Exchange-Traded Commodities for saffron and other agro products and create futures and options contracts on ETCs.

The bourse also wants to better tap the capabilities of commercial banks in the area of certificates of deposits and use the services of market makers like investment banks.

As part of plans to diversify and expand financing methods for agricultural products on the Iran Mercantile Exchange, the bourse on Sunday launched the options contract for saffron.

According to the IME news website, on the first day of options trading, 426 options contracts worth 432.5 million rials( $) for saffron were traded.

Options are a type of derivative security. An option is a derivative because its price is intrinsically linked to the price of something else. If you buy an options contract, it grants you the right, but not an obligation, to buy or sell an underlying asset at a set price on or before a certain date.

A call option gives the holder the right to buy stock, and a put option gives the holder the right to sell stock.