Iran’s government hits out at crypto again as currency freefalls

As the value of the national currency falls in a troubled economy, Iranian authorities have once more cracked down on cryptocurrencies and online exchanges.

More than 10 million crypto users were unable to use the rials on Bitcoin and other global online currencies after the Central Bank of Iran (CBI) abruptly stopped rial payments in all cryptocurrency exchanges last month.

The goal was to stop the troubled national currency from becoming a substitute for foreign currencies in order to prevent further depreciation.

As countless young Iranians turn to a growing global market to make money in a largely isolated economy struggling under harsh Western sanctions, the crypto market increased significantly last year and leans toward a bullish 2025.

The decision had previously been tried at a limited number of times before, but never on such a scale, giving the impression that it was a part of a larger effort by the establishment to impose strict standards of control and oversight on the growing crypto community.

Years of economic isolation and a rise in inflation rates of more than 40% have plagued the country.

CBI establishes authority

After imposing the block, the central bank mostly maintained radio silence, not offering clarifications to the public.

Additionally, the CBI did not respond to an Al Jazeera request for comment.

It was only stated in a statement that CBI governor Mohammad Reza Farzin attended a meeting of the heads of state, judiciary, and parliament last month, and that the organization was given “full authority to monitor and manage the cryptocurrency market” at the time of the meeting.

President Masoud Pezeshkian also sent a letter, published in the media, to Farzin last week, emphasising that CBI is the “sole trustee to manage” the crypto market.

The government wants to see more export trade, which will allow cryptocurrencies to enter the Iranian market, but it did not specify how this would be done at the meeting last month.

As CBI continues to pump more foreign currency into the volatile local market and police regularly announce the arrest of illegal currency traders in Tehran and other major cities, the new restrictions appear to be a part of strict measures to stop currency depreciation.

The Iranian rial continued its slide this week, hitting a new all-time low of more than 940, 000 per US dollar. A dollar fetched less than 600, 000 rials in October last year, and less than 40, 000 in early 2018.

The national currency has been experiencing a sharp decline in recent weeks amid escalating regional conflicts, blows to the Tehran-led “axis of resistance”, and Donald Trump’s insistence on a “maximum pressure” campaign.

A 4 percent cap for USDT?

CBI imposed restrictions on online exchanges and commenced negotiations with them shortly after its unexpected decision to ban rial purchases of cryptocurrencies.

Many smaller exchanges had to submit proof of reserves as part of at least some of the requirements. Some have had their rial gateways restored at limited capacities, while others are still negotiating.

Some of the “proposed measures” by CBI comprised top levels of access to customer information, including real-time access, constant updates, and an ability to block users whenever deemed necessary, according to documents reviewed by Al Jazeera.

CBI plans to impose daily caps on how much the rial-price of cryptocurrencies can fluctuate, in line with the artificial limits that Iranian stock market regulators have placed on the market.

Their rial trade would be temporarily suspended if the currencies moved past defined limits.

The dollar-pegged stablecoin Tether (USDT), which many Iranians have purchased as a hedge, is particularly appealing to the central bank.

Iranian traders would be temporarily prohibited from buying USDT if they rose by more than 4% in a day, according to it.

Rationality is not on the agenda, you read that.

Some crypto exchanges were forced to start looking for temporary solutions, such as using different bank accounts to make rial payments, as a result of the sudden block of rial gateways.

Users could still opt to withdraw pounds from their accounts if they so desired, regardless of whether ingoing or outgoing crypto transactions were affected.

The central bank is facing criticism and Economy Minister Abdolnaser Hemmati, a former central bank&nbsp, chief&nbsp, and presidential candidate, is now being targeted for impeachment by hardline lawmakers. The government maintains that the minister’s impeachment is motivated by political demands, since lawmakers want to remove him only a few months after he began.

The director of a local exchange claimed that CBI has instead deflected attention and tried to make money through online exchanges rather than addressing its own imbalances in a troubled economy.

“Repeated warnings about the adverse political, social and economic impacts of such moves, provided by stakeholders and the media, have not been heeded. The central bank closed the payment gateways with a businesslike, unethical and biased approach”, Ubitex CEO Eisa Keshavarz told Al Jazeera.

He claimed that the establishment restricts access to foreign services like social media sites to Iranians and that it is doing so to entice them to use local platforms.

These “double policies” demonstrate that people don’t prioritize rationality, reason, and empathy for others, which widens the gap between the people and the government.

Keshavarz said people will turn to unofficial, underground activities as a result of the restrictions.

“I believe it is the people’s inalienable right anywhere to turn their hard-earned money into gold, greenbacks, crypto, housing or anything to preserve their purchasing power”, he said.

‘ Minimising risks’, but for whom?

In the past, CBI and others attempted to regulate the burgeoning crypto industry, but almost all of them failed to satisfy or confound stakeholders.

In 2019, the government authorized crypto mining, the process of creating new coins using computational power, under stringent rules.

Many miners were forced to leave, primarily as a result of repeated power outages on mining rigs.

Observers and experts now believe that regulators, faced with a widening government budget deficit, will move towards taxing crypto transactions.

The top Iranian internet governance body, the Supreme Council of Cyberspace, released a regulatory roadmap last month that, according to observers, does not look promising for the crypto community.

It discusses “facilitating international trade” through crypto, which, according to crypto and blockchain researcher Saeed Khoshbakht, could be interpreted as attempts to circumvent sanctions on Iran.

“Especially after Mr Trump’s election, this could expose crypto users to risks of being blacklisted or having their transactions flagged on international exchanges”, he told Al Jazeera.

The expert claimed that using the term “international transactions” as a key phrase in the document could also lead to unaudited domestic crypto transactions due to their potential confidentiality and consequently lessening transparency.

At the same time, the regulatory document adopts a policy of “active control and countermeasures” in dealing with global cryptocurrencies, purporting to “minimise risks”, but does not say exactly how or for whom.

Source: Aljazeera