Iranian President Hassan Rouhani. Picture by Mohammad Reza Meysami via wikipedia. License: Creative Commons
Iran circumvents the financial sanctions by paying for an import with a cryptocurrency. Will Bitcoin become the new currency? Or is it a dollar token? And who is the trading partner? We gather what there is to know and speculate.
On August 9, the Reuters news agency reported that Iran had paid for an import with a cryptocurrency for the first time.
Reuters refers to the semi-official Tasnim news agency; a tweet from Ali Reza Peymanpak, Deputy Minister of Industry and head of the Iran Trade Promotion Organization (ITPO), confirms this.
این هفته، اولین ثبت سفارش رسمی واردات با #رمز_ارز به ارزشی معادل ۱۰ میلیون دلار با موفقیت صورت پذیرفت. تا پایان شهریور ماه، استفاده از رمز ارزها و قراردادهای هوشمند به صورت گسترده در تجارت خارجی با کشورهای هدف عمومیت خواهد یافت. #فصل_جدید_تجارت_خارجی
– علیرضاییمانناا (@peymanpak_ir) August 9, 2022
The information is consistent, but thin: it was an import in the amount of 10 million dollars. Which goods were imported, who is the exporter, which cryptocurrency was used – that remains unknown.
Does Iran use Bitcoin? This would not be absurd. In 2019, the country allowed the mining of Bitcoin and other cryptocurrencies, but made the condition that the mined coins should be available for the import of goods. As in Venezuela, Bitcoin was supposed to serve as a currency after the financial sanctions had disconnected Iran from dollar traffic. Because Bitcoin is a method to convert energy into an uncensored motto. So it would be close.
At the World Economic Forum in early 2020, a Coindesk reporter looked at whether Arab elites are willing to pay for oil supplies with Bitcoin. Almost everyone was skeptical because they did not trust cryptocurrencies. Many, however, longed for an alternative to the dollar, especially for oil supplies, but felt that this should rather be driven by Russia and China.
Could this be the moment? Russia is driving a departure from the dollar regime in international trade, and Iran is the first trading partner? That would be a good geopolitical fit.
The two countries have even openly announced this. They have been intensifying their relations since the Ukraine war, and the question of how to circumvent sanctions in trade is central to this.
In June, the governor of the Central Bank of Iran, Ali Salehabadi, traveled to Moscow. Shortly after, the government said that Russia and Iran were developing a settlement system for the ruble-rial currency pair. This allows trading liabilities to be settled in the partner’s currency instead of going over the dollar. On July 9, the first trading with this system took place. But it included only three million rubles, which is about 45,000 euros.
And Russia – Not so long ago, Russia offered that “friendly nations” would be allowed to pay for imports with cryptocurrencies such as Bitcoin. So it would definitely be an option.
However, some other evidence suggests that Russia and Iran would not use Bitcoin. For example, Peymanpak’s tweet contains a small clue: he announces that “the use of cryptocurrencies and smart contracts in foreign trade” will be widespread this year. Both Twitter and Google translate the decisive words in the same way: “cryptocurrencies” and “smart contracts”. Now that sounds more like one or more tokens on a smart contract platform like Ethereum.
For example, tokens for rubles and rials. Or for dollars. However, these tokens do not have to circulate on an open blockchain like Ethereum. They could also run on a closed blockchain, as they prefer most “CBDC” projects (Central Bank Digital Currency). Under certain circumstances, a blockchain is only one component of another system.
Russia is apparently working on such a blockchain. Just in June, Rostec, a Russian state-owned company for high-tech products for the civil and military sectors, said it had developed a blockchain platform called CELLS, which could replace SWIFT.
This could be part of the alternative to Swift, which Russia and Iran have long wanted to establish. It seems to be getting under way slowly, under the pressure of financial sanctions. At the end of July, the central banker Safari said that a very good agreement had been reached with Russia to “de-dollarize transactions using a Swift-like system.” This system, the government of Iran hopes, will include other currencies in the future, for example, the Turkish lira, the Indian rubie or the Arab dirham.
Cryptocurrencies themselves, on the other hand, should be banned domestically. Only on August 12, the governor of the Central Bank of Iran said that it was forbidden to buy, trade or use cryptocurrencies as an investment. Only mining for the purpose of paying for imports is legal – which in turn could be an indication that Iran has paid for the import with a mineable cryptocurrency, perhaps also Ethereum.
In Russia, too, there is little belief in letting citizens use cryptocurrencies freely. In July, a law came into force that extensively prohibits the use of cryptocurrencies as a means of payment. A tyrannical state may selectively use cryptocurrencies – but it cannot possibly tolerate their free development.
