The U.S. and most allied governments have long accused Iran of using bitcoin to get around sanctions imposed to punish Iran for its nuclear program. Now the Central Bank of Iran is getting in on the action, formally creating a system to allow businesses to make payments in cryptocurrencies.
Along with dark market drugs and ransomware, sanctions-busting by Iran, North Korea and other sanctioned regimes has been one of the big arguments by crypto opponents that bitcoin is a tool designed for illicit activities.
On Jan. 10, Iran’s Mehr News Agency reported that Alireza Peyman Pak, head of Iran’s Trade Development Organization, said that it had reached an agreement with the Central Bank of Iran (CBI) to connect the country’s comprehensive trade system with a cryptocurrency system, Ramzarz, that will let the country’s businesses settle international transactions.
Which is another way of saying that Iran is building a formal system to use bitcoin and other cryptocurrencies to bust sanctions. Violating the rules can result in fines of up to $1 million and 20 years in prison, as well as civil penalties of up to twice the amount of the violating transaction.
The Treasury Department’s Office of Foreign Assets Control (OFAC) has already leveled this weapon against crypto developers. On Sept. 27, Ethereum developer Virgil Griffith pleaded guilty to one count of conspiring to help North Korea evade sanctions, reportedly in exchange for a six and one half year sentence.
Read more: DOJ Charges North Korean Hackers With $1.3 Billion Crypto, Cash Theft
The case, based on Griffith speaking at the “Pyongyang Blockchain and Cryptocurrency Conference” in April 2019, was controversial in the libertarian-leaning cryptocurrency community because the Ethereum Foundation’s former research scientist said that he spoke only about very basic blockchain and cryptocurrency concepts easily available on the web.
Actual Assistance
The international side of Iran’s Ramzarz system is in place and the internal parts will be in place within two weeks, Peyman Pak said.
“All economic actors can use these cryptocurrencies” he said, specifying exporters.
“The comprehensive trade system will be defined and used so that economic actors and exporters can use international tools,” he said. The news outlet summarized his explanation: “The trader takes the ruble, the rupee, the dollar, and the euro somewhere, which he can use to obtain cryptocurrencies such as bitcoin … which is a form of credit and can pass it on to the seller or importer.”
Last May, blockchain analytics firm Elliptic estimated that in the first four months of 2021, 4.5% of all bitcoin mining was in Iran. Of the course of a year, that would amount to $1 billion. It likely didn’t, however, as the country twice slapped a ban on mining when facing blackouts.
See: Bitcoin’s New Headwind: ESG Investors Double Down on Its ‘Staggering’ Pollution
“Financial institutions should consider the sanctions risk they are exposed to due to Iranian Bitcoin mining — particularly those that are beginning to offer cryptoasset services,” Elliptic Co-founder and chief scientist Tom Robinson warned in a blog post. “If 4.5% of Bitcoin mining is based in Iran, then there is a 4.5% chance that any Bitcoin transaction will involve the sender paying a transaction fee to a Bitcoin miner in Iran. Financial institutions should also be on the lookout for crypto deposits originating from Iranian miners that are seeking to cash-out their earnings.”
Read also: Senators Want to Track Crypto Mining Overseas
On Jan. 10, Peyman Pak noted that the central bank — on its own initiative — told the organization it could create a system to use cryptocurrencies produced in Iran or received in payment by exporters to pay for imported goods.
The proposal, he added, would make it easier to use “the cryptocurrencies produced in the country to develop trade and import goods.”
While Iranian importers and exporters may run into legal restrictions on crypto in target markets including Iraq, Afghanistan and Pakistan, their use is nonetheless popular in them and plays a significant economic role, he added.
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