After banning Bitcoin transactions earlier this month and discussing the creation of a state currency since February, Iran has officially announced that a domestic cryptocurrency blockchain is now ready for testing. Iranian officials say their motivation is strictly an internal need for economic security and growth, however; the probability of international sanctions returning may be the underlying factor.
Support of Domestic Coins
According to Mohammad Javad Azari-Jahromi, Iran’s Information and Communications Technology (ICT) minister made it clear that the Central Bank’s ban on Bitcoin “…does not mean the prohibition or restriction on the use of the digital currency in domestic development.” The reason behind the ban, says Azari-Jaromi, is that coins like Bitcoin could lead to a lose of profit for local investors. This concern may have been developed out of Bitcoin’s recent instability in the cryptocurrency market over the past several months.
However, the timing and swiftness of the Bitcoin ban, and the state-run cryptocurrency launch, has a lot to do with impending sanctions from the U.S. It began when the Iranian currency, rial, fell to a record low in the beginning of April after months of worrying that U.S. sanctions would return. Fear of the rise and replacement of Bitcoin over the failing rial forced the Central Bank to stop it in its tracks.
U.S. President Donald Trump has until May 12, 2018 to renew or dissolve the Iranian Nuclear Deal, which if dissolved would put Iran back on the U.S. sanction list. This would be detrimental to Iran’s economy as foreign investments and exports would be blocked. A cryptocurrency controlled by the state would allow the country to avoid the restrictions set by the Federal Reserve and internationally run banks.
Although Trump has criticized the deal that implemented a freeze and a U.S. monitoring of nuclear testing in exchange for lifting economic sanctions, he has not made a decision to continue the exact agreement made in 2015.