At first glance, the move is a formality, as Iran had already effectively banned open trading of cryptocurrency. However, it may signal the intent of Iranian regulators to counter the removal of capital from the country.
Bitcoin Miners in Iran Have a New Buyer: the Central Bank
Oil and natural gas deposits make Bitcoin mining in energy-abundant Iran relatively cheap and lucrative. Since legalizing cryptocurrency mining (but not trading) in 2019, Iran has looked to regulate the industry to its advantage.
Last October, as Iran looked to avert crippling US sanctions initiated during the Trump administration, the Central Bank mandated that registered Bitcion miners within Iran sell the mined tokens to CBI . The move gave the country an alternative way of paying for imports that bypassed foreign currency restrictions.
Iran’s central bank has declared that transactions of cryptocurrencies which were mined outside of Iran are forbidden – in Iran, one can only transact with locally mined coins! https://t.co/YuOwdIkPG5
— Meh (@Fatalmeh) May 6, 2021
This week’s prohibition comes with some obvious logistical hurdles, such as how exactly one ensures “foreign” BTC stays out of Iran.
Attorney Fatemah Fannizadeh suggested enforceability among individual holders may not be the goal.
“I don’t think it will be enforced on an individual level,” she tweeted. “Exchange platforms can basically not operate. But instead of a blanket ban, it allows banks and forex offices to use Iranian crypto for international transfers.”
That last part is key, as Iran is one of the few countries locked out of SWIFT, an international network for transferring money. The others are Cuba, North Korea, Syria, Sudan, and the Crimea region in Ukraine.
“This just means that Iran wants to export Iranian produced coins more aggressively, encourage mining, and counter capital flight in the face of a depreciating Rial,” Fannizadeh wrote.
The rial lost 80% of its value against the dollar between January 2017 and January 2021. During that same span, Bitcoin’s value increased over 3,800%.