Iran announces new legislation to require Bitcoin miners to exchange all digital assets through the central bank

(Last Updated on November 6, 2020)

Times are changing quickly for central banks and countries around the world. Devastated by corona virus, sanctions, and years of war, Iran is making an intelligent move to save their nation state as the national currency plunges further into inflation and worthlessness..

Now all Iranian cryptocurrency miners MUST exchange all digital assets through the Central Bank of Iran.

The Iranian economy is in serious need of a strong reserve asset that could boost its wealth – Bitcoin prevailed as the best choice.

This is coming as an economic hail mary after the major national currency crisis that the Iran Rial has been in for sometime now. They need to make some moves regarding hedging their currency and also putting their energy resources to work. With oil prices at an all time low this year, and reduced forecasts ahead, utilizing some of those cheap, natural resources would be a great way to support the central bank.

 According to this amendment, the cryptocurrencies extracted based on the licenses issued in this resolution can be exchanged only to provide the country’s import currency and in accordance with the regulations determined by the Central Bank.

Extractors must also provide the first-hand currency code generated to the authorized limit and directly (without intermediaries) to the channels introduced by the Central Bank.

According to the announcement of the Ministry of Energy, accordingly, the authorized limit of the currency code extracted and exchanged by each extracting unit, based on the amount of energy consumed by that unit, according to the instructions prepared by the Ministry of Energy, is determined and periodically announced by the central bank.

ISNA Announcement

The new announcement came from Iran’s cabinet Ministry of Energy regarding “cryptocurrency equipment and mining extraction”. It is updating a previous resolution that had banned cryptocurrency throughout the country. The initial move to ban mining seems to have been an equipment grab by the government to swoop in and steal from new opened crypto business.

On October 18th, 2020 – the ISNA releases “A brief review of the Rial’s currency crisis”

In the middle of the month we saw some of the first press releases hinting at the Iranian ministry possibly targeting cryptocurrencies as a reserve asset for the Rial. This seems to be a logical choice as they have suffered greatly under U.S. sanctions and failing against the U.S. dollar as a global reserve currency.

As it’s not possible for Iran to peg its currency to Dollar or Euro, it should consider other valuable assets such as gold or cryptocurrency. Gold seems more advantageous because it is more acceptable worldwide and Iran has sufficient gold reserve.  Some well-known experts and economists have suggested this solution.  Adopting a gold-backed currency needs a currency-board. Currency-board, which is established to issue notes and coins can work separately or parallel to the central bank.

Independence of the currency board and its authority to making policies are crucial for its success. By issuing a currency, which is anchored to a strong currency or commodity, the local currency will be as well good and valuable as them.

The currency board must have enough reserves to defend the local currency (minimum 100% of all local money in circulation) and be committed to convert the local currency to the anchor currency or commodity.

ISNA “A brief review of the Rial’s currency crisis”

Central Bank of Iran believes they must move quickly toward utilizing gold and cryptocurrency

Also the Government and the central bank must take some painful decisions to reform some of monetary infrastructures. These reforms are but not limited to:

1 – Encouraging investors to enter to the stock market

2 – Increasing the attractiveness of debt bonds

3 – improving the public expectations by starting new round of reforms both domestically and internationally

4 – increasing the role of bond market in financing the government’s budget deficit

5 – decreasing the speed of creating new liquidity, reforming the banks balance sheets and preventing banks from doing Ponzi scheme

6 – diversifying the offshore currency markets by increasing the financial network abroad and managing foreign remittance

7 – unifying official and unofficial currency markets

8 – Using cryptocurrencies capacity more

9 – start negotiation with the United States to lift the financial sanctions

10 – decrease public expenditures and implanting more austere fiscal policy  

ISNA “A brief review of the Rial’s currency crisis”

Iran is very attractive for cryptocurrency mining due to its CHEAP electricity.

Proven oil reserves in Iran, according to its government, rank fourth largest in the world at approximately as of 2013, although it ranks third if Canadian reserves of unconventional oil are excluded.

Holding some of the largest oil fields in the world, Iran is not sure on energy and has tons of facilities that could be a perfect foundation for successful Bitcoin mining. Not only a smart inflation hedge, it can provide a country with a strong reserve asset while its oil and fiat currency is rapidly devaluing. I am sure the Iranian government is planning on utilizing all of their “free” energy to crank out as much BTC as possible.

With countries all around the globe falling into similar national fiat and reserve issues – it is going to be a race to see which other countries dive into mining these next years!

It is certain that other countries are looking at similar issues with devalued currency and lacking reserve assets..

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