Iran has started using cryptocurrencies to settle cross-border trade transactions as it seeks alternatives to the US dollar and the international banking system.
Ali Reza Paymanpak, chairman of the Iranian Trade Promotion Organization (ITPO), announced on August 9 that the first formal import order using cryptocurrencies had been placed “this week.” Peymanpak, who is also deputy minister for industry, mines and trade, did not specify which goods or services were exchanged or who they were exchanged with, but said the deal was worth $10 million. .
Countries like Iran are expected to start using smart contracts more in their foreign trade to evade sanctions-related restrictions. Given that Iran and Russia have been working closely in recent months to reduce their reliance on the US dollar in bilateral trade, and have also proposed launching a new payment system using their respective currencies, this is likely to be the case. is important. Until then, cryptocurrency means of doing business will provide an uninterrupted way to do business.
Iran’s cryptocurrency policy
In early 2019, the Iranian government banned cryptocurrency trading in the country. This has to do with the proliferation of thousands of cryptocurrency mining facilities in Iran, thereby significantly impacting the electricity supply of the entire country. PoW) is a competitive process of validating and adding new transactions of cryptocurrencies that use the PoW method to the blockchain. Winning miners are rewarded with some currency and/or transaction fees.
In today’s world, miners ideally need computers with lots of high-end GPUs. This process consumes a lot of power. As such, the growing number of miners in the country caused widespread blackouts. Just last week, Iranian authorities announced that he had seized nearly 10,000 illegal cryptocurrency mining devices over the past five months. Many of these were found in public places, such as schools and mosques, where electricity is provided mainly free or subsidized.
However, Iran has not outright banned the use of cryptocurrencies such as Bitcoin and Ethereum. This concerned the use of highly valuable cryptocurrencies for international trade and export. I made it Government agencies felt this would help circumvent restrictions imposed because of American sanctions.
The source of the cryptocurrency will be thousands of miners within Iran. In 2019, Iran will implement a licensing system for Bitcoin miners. It requires registration, payment of a small premium for electricity, and sale of all mined bitcoins to the National Bank of Iran. It’s important to note that an estimated 4.5% of all global bitcoin mining takes place in Iran, according to blockchain analytics firm Elliptic.
Iranian Trade Promotion Organization (ITPO) Chairman Ali Reza Paymanpak addressed Iranian media earlier this year on the topic of using cryptocurrencies for cross-border trade. “These cryptocurrencies and blockchain systems have a lot of practical business arguments,” Peymanpak told Iranian Mail news agency. “Cryptocurrency usage is popular in major markets such as Russia, China, India and Southeast Asia,” he continued.
How Is Iran Using Cryptocurrencies To Trade?
The announcement by Iran’s Deputy Trade Minister on the use of cryptocurrencies for bilateral trade has been interpreted as a message from Tehran that it has found a way to circumvent international sanctions cut off from SWIFT, the world’s largest bank transfer system. it was done. For decades, it hindered Iran’s ability to import weapons and foreign technology. Thanks to US-imposed sanctions over Iran’s alleged nuclear program, Iran has constantly monitored transactions that are anonymous in nature, untraceable and outside the reach of international regulators.
Skeptics still see cryptocurrency transactions as potentially not 100% anonymous with respect to the two parties involved, but they are the fastest way to conduct secure, untraceable transactions. There is no change. This provides users with a bit of anonymity, even though cryptocurrency transactions are recorded on a blockchain (which is open to the public), cryptocurrency transactions are not necessarily tied to an identity. It’s for
Russia is now embroiled in its invasion of Ukraine and is fighting to maintain trade ties with the EU, US and other countries. This makes Russia, which has always been a pioneer in entering the world of cryptocurrency mining, a major player involved in using mechanisms to circumvent trade barriers. Sources also say Iran and Russia may engage in bilateral trade via this route.
Iran’s bold declaration to use smart contracts to trade with the country is something that still needs to be passed. Executed when a certain group of conditions are met. They are typically used to automate the execution of contracts so that results can be seen immediately by all parties without the involvement of intermediaries or loss of time. However, in this case, experts believe Iran is highly unlikely to get what it wants while processing transactions related to cryptocurrencies.
As a follow-up question, how many legitimate companies or countries would want to risk doing business with Iran and later being exposed and subject to their own sanctions? So, why would Iran want to publicize this? Except for Kalashnikov rifles and small arms, heavy arms trading and the purchase of planes and ships are not yet done in cryptocurrency-based exchanges. Therefore, Iran’s options are limited.
Is it a permanent solution? What about regulations?
Recent cases of crypto-related research have also shown that the transparency claimed in crypto-based transactions can be broken with great effort.
Earlier this year, $3.6 billion worth of bitcoin was seized from a US couple charged with money laundering. This was related to the 2016 hack of the Hong Kong cryptocurrency exchange Bitfinex. This made him one of the largest financial seizures by the Department of Justice. Investigative agencies have gone to great lengths to do the unthinkable when it comes to tracking down illicit funds stolen via Bitcoin.
The whole investigation took just over six years. This has brought renewed interest to the debate over the degree of traceability of such transactions. Specifically, identifying trades that exhibit unintended patterns that can be easily spotted and tracked as outliers.
Since Russia’s invasion of Ukraine, international regulators and watchdogs have stepped up efforts to monitor cryptocurrency transactions, especially those made for illegal trading. The EU has introduced new legislation to track and monitor crypto transactions to “prevent money laundering, terrorist financing and other crimes.”
The U.S. is stepping up its efforts too, with the U.S. Treasury Department currently investigating Kraken, a U.S.-based cryptocurrency exchange, to allow Iranian customers to conduct virtual transactions. Following this, many other entities like Coinbase have also been questioned for allowing transactions performed to evade sanctions, making compliance a hot topic.
It is important to note that Iran is always looking to replace the US dollar as the currency for doing business with other countries and has already started trading with Russia using the ruble. . Iran’s Economy Minister Ethan Kanduzi also expressed the country’s desire to exchange the dollar with China, Turkey and India in business.
India is unlikely to do business with anyone via cryptocurrency, let alone Iran, but India maintains a firm trade relationship with Iran, allowing transactions to be settled in rupees and banks between the two We are considering establishing a mechanism. Countries similar to those being investigated by Iran and Russia.
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