Author: Peter Chawaga Source: bitcoinmagazine
At the end of October, the “Iran Daily” reported that the Iranian government has revised its cryptocurrency regulations so that “digital assets are exclusively used for imported goods when the country’s normal use of hard currency is under increasing pressure.”
In practice, this means that Bitcoin and other cryptocurrencies that are formally mined under government supervision will have to be directly provided to the Central Bank of Iran (CBI) within the authorized limit, which depends in part on the amount of subsidized energy used by the miners.
“Miners should directly provide original cryptocurrency within the authorization of the channel introduced by the Central Bank of Iran.”
The report did not clarify how or at what price the central bank of Iran buys cryptocurrencies, but the government is likely to buy bitcoins at below market prices.
This latest update of Iran’s policy has become one of the most interesting key aspects of the global cryptocurrency landscape:
- Last year, Iran legalized cryptocurrency mining and established strict regulations to control this practice.
- With oil reserves and relatively cheap electricity, Iran can provide heavily subsidized electricity to miners and offset most of the cost of mining cryptocurrencies such as Bitcoin for companies that follow the rules.
- Alternatives to fiat currencies such as the U.S. dollar are attractive to large Iranian countries, because the economic sanctions of the United States and other countries largely prohibit transactions between Iran’s national currency and the world’s reserve fiat currencies.
- Due to the hyperinflation of the Iranian fiat currency rial, the Iranian people are seeking another way to store value.
In order to get a clearer understanding of what the latest development of Bitcoin in Iran means, I contacted Ziya Sadr, a Bitcoin holder living in Tehran, who has never left the country because the government “will not give him a passport.” I also spoke with Omid Alavi, the CEO of Vira Miner, who has a mining license and runs a legal Bitcoin mining farm in Iran.
Is Iran building bitcoin reserves?
As the latest amendment forces regulated miners to provide their BTC to the central bank, many Bitcoin communities have speculated that the country is building Bitcoin reserves. Bitcoin will be a powerful tool that can not only withdraw from its failed legal tender system, but also evade international sanctions. But Allawi and Sadr both denied this view.
Allawi said: “The government is not interested in buying Bitcoin, and this attitude is not limited to Iran.” Most central banks around the world are not interested in the risks and volatility of accepting Bitcoin.
Sadr agrees with this view and emphasizes that he does not know any inside information about the actual CBI plan.
“I don’t think the central bank will touch Bitcoin in any way.” Sadr speculated that the government will establish a cryptocurrency management system similar to its foreign exchange management system, namely NIMA. The system will only provide rates and other information, and Bitcoin will be transmitted directly from the sender to the receiver. “The Central Bank of Iran controls the NIMA exchange rate and promotes foreign currency exchange, but does not establish foreign exchange reserves through it.
Will the new rules curb the enthusiasm of Bitcoin miners?
Sadr pointed out that the latest amendment can solve the problem of regulated Bitcoin miners in the country. When they try to sell their rewarded BTC, they face a challenge from the government. He believes that this is not a restriction for miners because they must sell their bitcoins to the government to finance imports. He believes that this is good because miners now have a clear channel to sell cryptocurrencies in an approved manner. However, this does not apply to most Bitcoin miners operating in Iran, and may not have much impact overall.
“Most miners are not engaged in official and regulated mining activities, so it may have nothing to do with most miners.” Sadr said, “Some of the very few miners who try to formally start mining operations in a fully regulated manner may need this new regulation.”
On the other hand, Alavi hopes that the latest amendment will prevent cryptocurrency mining operations in the country.
He said: “Because of the high prices of electricity and natural gas for Iran’s access to cryptocurrency, the result of this decree will be to reduce Iran’s bitcoin production, because no miner is interested in providing bitcoin to the government at this price.
Allawi added that Iran’s Bitcoin mining industry is “very limited”, with reports that the country has only 14 legal mining centers.
Bitcoin’s prospects in Iran
Although the government itself is not interested in acquiring bitcoin and the legal mining industry is small, Sadr is optimistic about the growth of bitcoin among ordinary Iranians. He pointed out that the country’s basic economic problems are the main driving force, and pointed out that smartphones may make Iranians pay eight or nine months of salary. He shared some anecdotal evidence that more and more people are using Bitcoin to send money to Iranian family members and store their value, and move away from more traditional stored-value assets like gold, because gold can become a target for criminals.
Sadr said: “In terms of income and taxation, compared with Iranian legal tender, using Bitcoin is much better. People now understand this.” Sadr I expect Bitcoin will occupy more of such economic activities. A large share…As far as inflation is concerned, people have no choice but Bitcoin.
However, Sadr pointed out that he did not see an official “Bitcoin industry” in the country, and that the exchanges and mining companies that do exist are more suitable to be described as individuals who choose safe havens rather than formal groups.
The latest regulations of the Iranian government seem to reinforce this prospect. The regulations also formalize the production and subsidies of cryptocurrencies, but are also subject to a high degree of strict supervision and restrict the use of cryptocurrencies. This momentum seems to have stifled the thriving development of the Bitcoin industry that may have emerged and applied in a mature field, rather than encouraging it.
“So far, the Iranian government has not shown any real interest in supporting the crypto mining industry. It has only approved one or two weaker resolutions, most of which are propaganda.” Allawi explained. In general, the cost of Bitcoin mining in Iran is very high and there is no economic rationale. Currently, the amount of bitcoins mined is so low that it cannot meet the foreign exchange needs of factories.
