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Iran's New Crypto Law

Iran new crypto law overview

December 24, 2020 | 

JOHN K MWANIKI |  0 Comments| 

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The crypto wave is moving across the world. The latest in the crypto world is Iran's new crypto law. The Iranian government has amended its crypto regulations to allow mainstream cryptocurrency use. It allows the country's central banks to import goods using mined Bitcoin

The report is per the government-controlled media house IRNA news agency. It states that the new laws need licensed crypto miners to sell their coins to Iran's central bank. The new law is a work of the Central bank and the ministry of Energy. 

The new crypto law means that the miners would not trade their digital assets as before. Instead, they would have to supply the CBI with the given limit. 

The instructions on the supply will come from the ministry. It depends on the subsidized energy the miner uses. The ministry will provide a ceiling that no miner should exceed. Every other exchange would also be in line with the new crypto law.

The new crypto law also guides crypto circulation in the local financial system. It is the best short for Iran at international trade. This follows its dwindling economy.

Economic Desperation

Iran has had one of the worst economic performance in recent years. The country is struggling to contain high inflation rates. At 35% since 2018, inflation means the national fiat currency is fast losing its value. They are thus struggling to pay for imports and other international trade. 

The country is also reeling from the effects of economic sanctions. The US sanctions against the country mean it cannot use the USD as a back-up currency. They have since been struggling to buy essentials like pharmaceuticals and other supplies. 

Iran's choices have become less with increasing struggles. While Bitcoin struggles with volatility, it has no choice but to adopt it. The desperate economic situation means only virtual currencies can come in place. 

The new crypto law is the first time a country adopts cryptos in a centralized system. Most of the countries have only wanted to regulate the coins without direct adoption. Some of them have also banned them altogether. 

The move by Iran can be the start of a new wave for the cryptos. No country ever wants to be the first to make such a move. 

The Evolving Relationship between Iran and Cryptocurrencies

Iran's new crypto law is not the first time the country has had inroads with digital currency. Iran has a long unstable history with digital currencies. It was one of the first countries to ban digital currencies in these jurisdictions. 

The country argued that cryptos were a threat to the safety of investors. That is useful for money laundering and other illicit transactions. It also felt the citizens would use it to evade taxes. This still is ironic as it was planning to use the cryptos to evade economic sanctions. 

Iran, though, changed its attitude towards cryptos in 2018. It recognized cryptocurrency mining as a legal industry. The move meant that it could track and regulate crypto mining. It would involve controlling the power supply and the crypto operations in the country. They were even considering a possible national cryptocurrency. 

Iran is one of the ideal crypto mining spots due to the low cost of power. The miners could cover the cost of power and still profit. It competes with other top mining destinations like Russia, China, and Poland. 

Iran made an about-turn the following year, banning crypto mining in 2019. It shut all the mining plants. It then declared crypto mining using industrial electricity illegally. The government argued mining took a toll on the country's power supply that it was to blame for the frequent power outages. 

The banning of mining meant Iran lost on possible income. They could not gain from the proceeds of mining. This was at a time when they were starting to have economic struggles. It's only natural that the ban would not last for long. 

In 2019, the government agreed to crypto mining. The new crypto laws would even let them release the arrested miners. They were also to get back their mining tools. The move revamped the dying crypto markets

The Iran population is receptive to digital currencies. The country has several formal organizations advocating for cryptocurrencies. Iranian Blockchain Association is one of such groups. There are several other groups by researchers, investors, hobbyists, and students. 

The country would still have a varying stance on digital assets. It at one point increased the cost of mining by 300%. While the government didn't ban mining, it made it almost impossible to partake. 

The country has since gotten hold of crypto mining. It earlier provided 1000 mining licenses for companies. The latest new crypto laws ensure total control. 

The Possible Effects of Iran's New Crypto Law

Iran's new crypto law is not the most popular move in the crypto world yet. Satoshi Nakamoto launched Bitcoin to ensure decentralization. The miners believe the coin is the liberation from the government-controlled economy.

By regulating mining and trading, the currencies become more centralized.

The other concern is on the trading rates by the ICB. Bitcoin rates rely on market trends. There is no single entity that determines supply and value. The new laws give the bank power to determine rates. The traders will most likely be on the losing end as they lose the profit margins. 

The rule to control cryptos is not in other industries. Crypto mining in the country would become more unattractive. More miners would want to operate anonymously. This loses the country's revenue in the process.

Also, as mentioned earlier, other countries are likely to join Iran in crypto adoption. After Iran, other countries would be willing to use cryptos in the mainstream economy, albeit with different rules.

Bottom Line

Iran's new crypto rules are the start of a new digital currency evolution. It creates a new way through which countries can use digital currencies.

Most traditional currencies are struggling following the coronavirus pandemic. Crypto adoption is the way. Soon enough, newer crypto laws would be in place. 

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