A developing strategy to mitigate the crippling effect of economic sanctions could see cryptocurrencies being used by Iranian firms to pay for imports such as raw materials and electronics.
Iran is continuing to explore the potential use of cryptocurrency as a tool for mitigating the devastating impact of economic sanctions imposed by the United States.
According to a report from the English-language Iranian economic news source Financial Tribune, the Central Bank of Iran, or CBI, is authorizing banks and licensed forex shops to use cryptocurrency as payments for imports.
Under its regulatory framework, the cryptocurrency must derive from licensed crypto miners only. These mining operations are officially permitted by the Iranian state as an industrial activity and require operators to secure a license from the Ministry of Industry, Mine and Trade.
As Financial Tribune reports, the Iranian government ratified regulations that would enable crypto to be used legally for imports in October 2020, provided that miners sell their coins directly to the CBI. Indeed, the strategy appears to have been several years in the making, with a 2018 report from Iranian think tank Majlis Research Center stating:
“According to experts, one way to avoid the adverse effects of the unjust sanctions is to use cryptocurrencies for foreign trade.”
In January of this year, Shahab Javanmardi, a member of the Iran Chamber of Commerce Industries Mining and Agriculture, advocated for the government to use cryptocurrency to help counter trade difficulties in a tough geopolitical climate. Venezuela, another country hit by U.S. sanctions, provides an example of a prior attempt to use cryptocurrencies such as Bitcoin (BTC) as payment for imports from Iran and Turkey. Javanmardi reportedly said:
“Repatriating revenue from exporting gas and electricity is not possible under the present [U.S. sanctions]. The government can promote use of excess electricity output or power generated by small-scale plants to mine cryptocurrencies and make up for the locked resources.”
Javanmardi proposed creating a central market, similar to the secondary forex market, through which officially mined cryptocurrency could be sold to Iranian firms seeking to import materials, machinery and other goods.
Sajed Nikpour, a member of the ICCIMA commission for promoting non-oil exports, is cited as saying that the private sector believes cryptocurrency’s usefulness for the Iranian economy applies to the trade sector and could facilitate a boost to domestic production by enabling imports of raw materials. Nikpour has stressed the need to keep such measures transparent. As reported back in September 2020, private sector representatives have also been appealing to CBI to approve the use of Bitcoin to pay for car imports on Kish Island.
Despite being encouraged by the authorities, Iran’s crypto mining industry has nonetheless had a turbulent couple of years. Illegal farms have been shut down en masse, and local authorities rushed to blame the mining sector for disruptive power outages in January of this year, which experts critiqued at the time as an ill-judged strategy of deflection and scapegoating.