Many in the early bitcoin and cryptocurrency community would probably jump from joy if they heard back in 2011 or 2012 that a major regional nation is starting to use crypto for their official business dealings. After all, it would be hard to argue that the process of crypto utilization on the highest levels of a national government is not a clear case of institutional adoption. In fact, even the use of cryptocurrencies by international companies pales in comparison to any official government usage.
However, being that this is 2020, the year that very few old forecasts about the present hold any merit, the same thing actually already occurred for the crypto community. Right now, bitcoin is legally recognized by the Islamic Republic of Iran as a means of payment and an official part of international trade deals. What would be otherwise a bombshell of news is presently going barely noticed.
The reasons for this are numerous and in many ways logical. However, the development and the entire process of unusual crypto government adoption in Iran are still interesting. It is so novel that it might even showcase a way other nations could also embrace crypto and do it in a way that is beneficial for the same country as much as for the crypto community and its long-term prospects outside of individual use.
Need for Cash
The story of the unusual alliance between cryptocurrencies and the government of Iran begins many years ago, even before blockchain technology came into being. Ever since the creation of the Islamic Republic in the early 1980s, the country was and continues to be one of the main international adversaries to the United States. With that status, it was natural that the nation came under a barrage of growing or receding sanctions.
In recent years, the international restrictions, headed by the US, focus mainly on the ability of Iran to do business on an international level. The same put a stranglehold on the government’s access to international currencies it would then be able to use trade deals with its partners. Now, to offset that economically damaging balance, the government in Tehran is pivoting in part towards cryptocurrencies. With their help, the country could keep the same flow of goods and money up and running.
Central Bank Decision
The news about the change in Iran’s approach with its clearly evolving monetary policy came from the IRNA, which is The Islamic Republic News Agency. It reported that in the previous week, the country’s cabinet decided to amend its legislation on digital assets. Now, the amendment allows the process of using cryptocurrencies by the Central Bank of Iran for funding imports. The decision came through a collaboration between the central bank and the country’s cabinet.
In itself, the move is a massive step for cryptocurrency in an official, government-run setting. Now, in theory, the Central Bank of Iran will be able to use the country’s internal BTC tokens – or other cryptocurrencies – to fund purchases that import goods into the country. From the legislative point of view, as well as from the perspective of the regulators in Iran, the same process is now just as valid as the central bank using the Iranian rial to purchase foreign currency and use it for international trade.
For some time now, Iran has had a legalized cryptocurrency mining industry inside of its borders. That means that anyone who wants to set up a crypto mining venture can do so with the permits of Iran’s central government. The latest ruling means that all legally mined BTC tokens can be now exchanged for other currencies, including the local ones if they are to be used to fund imports from other countries.
The cabinet and the central bank already set up the pipeline for that process. Now, crypto miners in Tehran and other cities will supply their tokens directly to the central bank. They will be employing an authorized limit to do that and the regulators will keep tabs on the influx of bitcoin and other tokens to the central bank’s digital wallet.
Growing Field of Business
The mining industry in Iran currently provides permits for 14 bitcoin mining operations. These are working using a 47 percent cut on the official price of electricity, thanks to a government scheme to support these facilities. All of them are officially recognized by the government which in turn provides subsidized energy usage. That process is coordinated with Iran’s Ministry of Energy, showing that yet another high-ranking government body is included in the decision-making process that the cabinet is undertaking regarding crypto.
At the same time, the amount of subsidized energy a mining facility uses will also determine their quota. There is no denying that the setup seems complicated and over-compartmentalized. But, it also shows that the same process is now well underway in Iran and is not a potential plan that a government might undertake at some future point.
The role of cryptocurrencies in the everyday dealings of the Iranian state is clearly only growing in relevance. Crypto is becoming more essential for trade because the nation is currently going through a range of economic hardships. On one hand, these are the result of long-lasting and deep-cutting sanctions. On the other, the country had and continues to have a difficult time with the COVID-19 coronavirus pandemic.
Yet, the chance for crypto is clearly being taken more and more seriously by the government. Behind the limelight, it is almost certain that the all-powerful and all-present Revolutionary Guard is backing this venture. Like with esports, social media, and other digital-only entities, the use of BTC for foreign purchases could make a big difference down the road. The plan could still fail or it could supply BTC token in a meaningless manner. But, it could also be a blueprint for other nations that are under pressure from the Western governments to seek their own crypto solutions to the cash crunch they are in.