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Iran is trying to ban foreign-mined cryptocurrencies for payments

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As a result of a rather unexpected move by the Central Bank of Iran (CBI), trading in cryptocurrency mined outside the country was banned. The Central Bank of Iran (CIB) has confirmed the ban to state-run Press TV.

The ban, highlighted by the Iran International news agency, aims to stop capital flight from the country, which may be related to the depreciation of the national currency, the rial. From January 2017 to January 2021, the Iranian currency has lost 80% of its value, while Bitcoin has grown almost 40 times over the same period.

This opinion is confirmed by lawyer Fatemeh Fannizadeh, who tweeted about it: “Сrypto is already regulated in Iran. Mining is a legal industry, while trading is banned to my understanding”.

The central bank could impose a complete ban. But banks and financial institutions allowed to use cryptocurrencies mined in Iran for international payments. Fannizadeh said this could signal that the state wants to “export Iranian produced coins more aggressively”, and the central bank’s actions may be aimed at developing cryptocurrency mining in Iran.

Although, the new laws may also be part of a larger sanctions strategy that has been developed over the years. Or perhaps Iran is making one of the first attempts at digital currency protectionism?

Exceptions to the rule

In fact, cryptocurrency trading in Iran considered illegal. But in 2019, the Iranian government legalized the mining of cryptoassets, recognizing it as one of the industrial sectors. Since 2019, regulators have issued over a thousand licenses for cryptocurrency mining facilities.

Last fall, Iran allowed the use of digital assets, but only to pay for goods imported from other countries. The Iranian authorities believed that this would help prevent the detrimental effect of US sanctions on the country’s economy. However, this week, the Central Bank of Iran introduced a restriction, which can in part be as a “green light” for cryptocurrencies. The Central Bank allowed the use of only those cryptocurrencies that legally mined in Iran. At the same time, the regulator didn’t explain how it will be able to track the inflow of “foreign” crypto assets from abroad. And how it intends to prevent them from entering the territory of the state. It is difficult to enforce the ban.

Previous prohibitions and exemptions in Iran

Recall that in 2020, Iran allowed miners to mine Bitcoin at local power plants, subject to certain requirements.

The government obliged miners working in the country to register, disclosing the identity, type and amount of installed equipment. Local power plants allowed to work with Bitcoin mining centers. If they have a license and comply with established tariffs.

In addition, last year the Iranian president instructed the government to update the national strategy for the development of cryptocurrency mining and reflect this in the legislation.

Tehran has previously repeatedly recognized the enormous potential of digital currencies as a tool to circumvent US sanctions.

The authorities of other countries under sanctions, for example, Venezuela, made similar statements.

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