Sources in Iran have given details of the country’s as yet unreleased cryptocurrency, which is currently being tested and reviewed.
In February, the head of Iran’s Ministry of Information and Communications Technology, Mohammad-Javad Azari Jahromi, announced the country was creating a “cloud based digital currency.” Although the launch date is still unknown, the Iranian government has released details about the currency, which reportedly is in the final stages of development. These details have been released by Informatics Services Corporation, the Iranian FinTech company that created the currency:
“1- It is rial-backed and has been designed and developed by Informatics Services Corporations based on Hyper-ledger Fabric Platform technology.
2- The issuer is Central bank of Iran and the volume of issuance depends on the bank’s decision.
3- Iranian cryptocurrency has been developed under private blockchain infrastructure and it cannot be mined.
4- The infrastructure is supposed to be as an ecosystem available for Iranian banks and active companies in cryptocurrencies area after being tested and reviewed.”
While several countries have considered creating national cryptocurrencies, Iran may have a particular interest in exploring the technology due to its contentious and unpredictable relationship with the US.
In an article from Iran’s IBENA News Agency from May, the chairman of the Iranian parliament’s Economic Commission, Mohammad Reza Pourebrahimi, specifically cited circumvention of US sanctions as a benefit of cryptocurrency adoption. Paraphrasing the chairman, the article stated, “National cryptocurrency can pave the path for multilateral currency swap agreements between Iran and countries which are enthusiastic to have economic cooperation with Iran but they couldn’t have it so far owing to the sanctions.”
These sanctions were removed following the 2015 nuclear agreement. However, in May of this year, the Trump administration announced the US would withdraw from the agreement and begin reimposing sanctions. These sanctions won’t come into full effect until November, but a prohibition on purchases of US currency by the Iranian government and on purchases of Iranian rials by Americans began in early August.
If the Venezuelan petro, purchase of which is prohibited in the US, offers any lesson, Iranian cryptocurrency is unlikely to be used in the US. It’s more likely individuals who wish to transfer money between the US and Iran would be better off using an already established cryptocurrency. (Bobby Lee, for instance, recommended Iran use bitcoin for all its commerce.)
In May, Pourebrahimi told IBENA that $2.5 billion worth of cryptocurrency had been bought up by Iranians. However, there’s no way to know if these purchases were made to facilitate international money transfers. They may just as likely have been hedges against the dropping value of the rial or simply speculation. Whatever their reason, the Iranian government did seemingly react to these purchases, banning cryptocurrency in April. However, there are reports that this ban will soon be reversed.
Iran may not even need a cryptocurrency to avoid US sanctions, the future and effectiveness of which are still uncertain. Iran is currently suing the US in the International Court of Justice over the reimposition of sanctions. The European Union, having invoked the “blocking statute” in May, is also attempting to prevent the US from reactivating its sanctions and punishing Europeans for doing business with Iran.
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