Iran Tightens Control Over Cryptocurrency Market Amid Economic Instability

Iranian authorities are implementing stricter regulations on cryptocurrencies and online exchanges as the value of the national currency, the rial, continues to decline amid economic challenges, Al Jazeera reports.

Last month, the Central Bank of Iran (CBI) abruptly halted rial payments on all cryptocurrency exchanges, impacting an estimated 10 million users’ ability to purchase Bitcoin and other cryptocurrencies. The CBI aims to curb the rial’s depreciation by preventing its use in acquiring foreign currencies.

This action marks a significant escalation in government oversight of the cryptocurrency sector, which has seen substantial growth in Iran as citizens seek alternative financial avenues amidst Western sanctions and an economy grappling with high inflation rates.

While similar measures have been implemented on a smaller scale in the past, the current restrictions are unprecedented in scope and duration. Following the implementation of the ban, the CBI has offered limited public clarification, only stating that the CBI governor was granted “full authority to monitor and manage the cryptocurrency market” during a recent government meeting.

Reports indicate that the government seeks to promote the use of cryptocurrencies in export trade, although details on how this will be achieved remain unclear. The recent restrictions coincide with the CBI injecting foreign currency into the market and law enforcement cracking down on illegal currency trading.

The Iranian rial has continued its decline, reaching a record low of over 940,000 per US dollar.

In the aftermath of the rial purchase ban, the CBI has initiated negotiations with online exchanges, imposing conditions that include providing proof of reserves and granting the CBI access to customer information, including real-time data and the ability to block users. The CBI also intends to impose daily trading limits on cryptocurrency prices, similar to those in place for Iran’s stock markets.

The restrictions have prompted some exchanges to seek temporary alternatives to facilitate rial payments.

The CBI’s actions have drawn criticism, with some accusing the central bank of attempting to generate revenue through online exchanges rather than addressing underlying economic issues.

Experts suggest that future regulatory measures may include taxing crypto transactions and that the government’s focus on international trade through crypto could expose users to increased risks of blacklisting or transaction flagging on international exchanges, particularly in light of potential changes in US policy. A recently released regulatory roadmap by the Supreme Council of Cyberspace has raised concerns about potential restrictions and reduced transparency in the crypto market. Some analysts interpret the document’s emphasis on “minimizing risks” as prioritizing state interests over those of individual citizens.