Can Digital Cash be the Answer to the Stagnation of Iran
Not long ago, Iran and six world powers namely the United States of America, United Kingdom, France, Russia, China, and Germany had concluded an agreement that would lift sanctions on Iran but place stringent measures on its nuclear program for more than a decade. It was designed to stop the spread of the atomic weapons and had averted a major new conflict in the Middle East. The Joint Comprehensive Plan of Action between Iran and the P5+1 and European Union, a comprehensive agreement based on the April 2005 framework, was announced.
This agreement came to be commonly known as the Iran Nuclear Deal. Finally, in 2015, the economic isolation was ended and it was declared that the country would be opening its doors to the international economy. Iran’s main asset for trade being oil. However, this day is a great ‘historic victory’ for Iranians came with a setback for the other Middle Eastern countries like Saudi Arabia, who was the top producer and exporter of oil in the world after the United States.
Iran in a plightful situation: after the re-imposition of sanctions
Valiollah Seif, governor of Iran Central Bank, had said in a meeting in 2016 of The Council on Foreign Relations in Washington that Iran had gained “almost nothing” from the deal. Before this deal, the country was separated from the international banking system through a ban from using SWIFT ( The Society For Worldwide Interbank Financial Telecommunication) a network that enables Financial Institutions worldwide to send and receive information about financial transactions in a secure, standardized, and reliable environment.
But on May 8, 2018, President Trump who long scorned the Iran Nuclear deal said that he was withdrawing from it and sent a message that ” The United States no longer makes empty threats”. The United States further intensified its financial pressure on Iran by slapping Anti-Terror sanctions on the head of its Central Bank and barring anyone around the world from doing business with him. That dealt a further blow to European hopes of salvaging the Iranian Nuclear deal in the wake of President Donald Trump’s withdrawal.
Following these controversial incidents, Mohammad Reza Pourebrahimi, the chairman of the Economic Commission of the Parliament of Iran was quoted saying “Based on the existing data, few people in Iran are cryptocurrency users and more than 2.5 billion dollars have been sent out of the country for buying digital currencies”. This was in line with the ban on the Iranians for not having access to the International banking system and so only unconventional ways such as exchange dealers or International travelers what is the way for money exchange. The Chairman’s statement came on the heels of the Central Bank of Iran banning banks and Financial Institutions from dealing with cryptocurrencies, citing money laundering and terrorism financing risks. Neither does the Central Bank of Iran admits to recognize and use Bitcoin or other cryptocurrencies and says that they conduct no transactions with them.
Should the Crypto idea be embraced or abandoned?
However, despite the ban imposed by the Central Bank of Iran, it is reported that Iran has been working on a cloud-based cryptocurrency prototype. Iran has developed an experimental local cryptocurrency, a government minister announced, days after the country’s Central bank ban on trading in digital currencies including Bitcoin.
Information and Communications Technology Minister Mohammad Javad Azari-Jahromi announced that “Last week, at a joint meeting to review the progress of the (local cryptocurrency) project, it was announced that the experimental model was ready”. Also, “The central bank’s (ban) does not mean the prohibition or restriction of the use of the digital currency in domestic development,” he was quoted as saying by state news agency IRNA. All of this implies that Iran is trying to emerge out of the crippling sanctions imposed by the United States of America. All the commotion could deal with through a simple unanimous platform where the only language for trading would be ‘cryptocurrency’.
Iran has been exporting oil to many countries, one of which is India. It has the world’s fourth-largest oil reserves. Though sanctions have been imposed for any global trading with Iran, India has somehow made its way through and has imported 19.8 million tonnes of crude oil from Iran in 2017. The major driving factor being Iran’s shorter distance from India as well as the mode of payment being Euros and not Dollars. After the president’s announcement of withdrawal from the Iran Nuclear deal in May 2018, the scenario for oil imports in India would not be affected unless the European banking channels will be blocked. Here comes a major use of the trade using cryptocurrency where the trade of goods(crude oil) could be instantiated using the Blockchain based platform and carried out with the help of cryptocurrency.
The young researchers of Blockchain technology in Iran have managed to keep up and adapt to the latest technologies despite the imposition of a ban by the Iranian government over digital currency. However, there is another major impediment that is the complex relationship between the Iranian government and Islamic law: Iran is governed in accordance with Islamic laws which has heavily regulated the banking sphere and hence does not allow ‘profit out of thin air’. This adds to the inconclusive argument whether the economy should be perceived in accordance with the Islamic law or the Islamic law will be the shaping factor of the economy.
Not only Iran, but Turkey has also been working on their own cryptocurrency called Turkcoin. In fact, there are various groups which are working on mining Bitcoin in Turkey, which makes the people reachable to the ‘invisible cash’.
There are various driving factors like the relationship between the central government and the Iranian people, the isolation of the sovereign union of Persia from the international banking space, also religious factors, and to a certain extent the mass adoption of the very alien concept like Blockchain based cryptocurrency. Even if these facets are covered and well balanced it could open gates of prosperity for the Iran economy. Nonetheless, rushing towards a decision whether to embrace or abandon the Crypto idea seems like a frenzied discussion over the years. Whether the mass adoption will help the Iranians emerge powerfully from all foes or will it incite disputable matters within the country is yet to be known.