Trading of cryptocurrency mined outside of Iran has been banned by the country’s central bank.
A news outlet coming out of Iran tweeted about the Central Bank announcing the cabinet’s decision regarding the cryptocurrency. According to the decision of the cabinet, trading of digital currencies that were extracted abroad is prohibited. Additionally, as per the decision, only currencies extracted inside the country can be traded.
According to some economists and crypto experts, the ban is an attempt to stop capital from flowing out of the country. The currency is depreciating Iranian Rial so they are perhaps doing this as a move to stop that.
This move by the Iranian central bank is weird in a number of ways.
Earlier there was talk about Iran’s central bank sort of embracing crypto as a way to deal with some sanctions. Now it is peculiar to see the country close its borders to cryptocurrencies while allowing them to be locally mined.
It is not yet clear as to how the central bank or government is going to execute the ban. Obviously, there are companies like Chainalysis, CipherTrace, and others that can do the tracking around where these coins are coming from.
It seems to be a way for Iran to try to manipulate their fiat currency with cryptocurrencies in an odd way.
Iran’s central bank, sanctioned by the US has been moving into cryptocurrency in a lot of different forms and fashion, mostly through mining. They have rather banned trading mostly inside the country. Therefore, this is one aspect where a geopolitical sanctioned country is seen moving to cryptocurrency itself. Then there is the Bitcoin tech side of this whole scenario raising many questions. Questions like how do you mine Bitcoin and restrict Bitcoin mining to one country, and what transactions can go into each block.
The first question of the regulation side shows that the central bank does not understand how the tech side of Bitcoin works. Bitcoin does not work by restricting mining and the creation of Bitcoin to one local jurisdiction, allowing it to be used in that area only. It cannot work like that because Bitcoin is an international platform that does not seem to recognize boundaries. As a matter of fact, this is how tech works and has been working since its inception.
On the other side, if you are mining Bitcoin, that Bitcoin has to go somewhere, it needs to be transacted from or to someone. You do not know necessarily know where that transaction came from. There are ways of tracing it but it is very difficult to do so it is not feasible all around.
Since cryptocurrency is still a fairly new concept, countries and their existing financial systems don’t really get it. Similarly, Iran too seems to be really confused and doesn’t quite get the mechanism of the cryptocurrency. Iran is quite inconsistent with how they deal with cryptocurrency right now. Earlier in the year, there was news about amendments made to the law in order to allow imports to be crypto-funded. It said that institutions will be able to pay for goods and services from other countries in a bid to circumvent US sanctions. Iran is endorsing cryptocurrency as a way to get around US regulations on one hand. On the other hand, they don’t want anyone going around their regulations, thereby attempting to prevent capital supply out of the country.