Fintechs Warn Against Crypto Ban

EghtesadOnline: The Iranian Fintech Association, a non-government body formed by fintech startups, has responded to measures announced by the Central Bank of Iran to block payment gateways of cryptocurrency exchange websites.

News ID: ۷۸۶۱۸۴

06 March 2021

It urged the CBI to focus on the bigger picture when it comes to innovative technologies, as hasty measures would kill opportunities for the national economy, a letter published on the association’s website said.

Last week the regulator in line with the government’s anti-money laundering measures ordered Shaparak, the local payment settlement network, to block online payment gateways owned by crypto exchange websites.

As per law trade in cryptocurrency is banned in Iran.

The association said using digital currency has helped Iranian businesses bypass the US economic blockade, namely tough restrictions on banking, industries, shipping and insurance. “Several businesses have either used the technology for meeting their needs, or have invested in cryptocurrencies without any particular risk."

"Restricting the use of cryptos would embolden the black market,” the letter warned. "It will also cut off investors’ access to their own money invested in cryptocurrencies.”

Virtual currency has gained popularity around the world but gained special traction in Iran after former US president Donald Trump unilaterally withdrew from the Iran nuclear accord with world powers in 2018 and imposed tough economic sanctions.

While trade in virtual currency is banned, unofficial and anonymous transactions in digital currencies has allowed individuals and companies to evade the US restrictions that have crippled Iran’s trade and banking ties with the international financial system.

Cryptocurrency gained further traction among Iranians in the past few weeks as its international value skyrocketed amid Iran's sluggish financial markets.

Bitcoin, the most popular cryptocurrency, broke through the $20,000 mark for the first time in mid-December and hit an all-time high of $52,340 in February. It has retreated a bit from the level. On Friday, the bitcoin was near $48,204 down 4.5% over the day.

With the prolonged bearish trend in the stock market, observers say liquidity has increasingly fled from the bourse as investors seek safe havens like cryptos.

While reiterating the crypto ban, the CBI Governor Abdolnasser Hemmati said last week the government is working on measures to limit trade only to those who mine cryptos legally.

"Bitcoin trade will be allowed only for commercial purposes," Hemmati was quoted as saying by Tasnim News Agency. "Trade will be handled by selected moneychangers appointed by the CBI".

Despite the ban, mining the virtual currency is considered a legal industry and miners can operate legally under rules approved in July 2019.

So far 24 cryptomining centers and farms using 310 MW have operating permits from the Ministry of Industries, Mining and Trade, according to ministry officials

The government sells electricity to legal miners at tariffs much higher than the subsidized rates to regular subscribers, which has exacerbated illegal mining.

Electricity bills sent to authorized miners are based on average power export tariffs and as per forex rates in the secondary market, known as Nima, where export companies sell their proceeds to importers.