By: Haniyeh Sadat Jafariyeh

Bitcoin in Iran awaiting CBI decision

December 8, 2017

Bitcoin, the digital currency that has dominated headlines in recent weeks, continued its march higher as it broke for the first time ever above $17,000 on Thursday.

Despite queries over its real value and worries about its dangerous bubble, the cryptocurrency has drawn attention of many people in the business community as the fastest growing asset in the world this year. The asset began 2017 at less than $1,000 per token, but it has been on an absolute tear in recent months: It crossed $5,000 in October and touched above $11,000 for the first time less than two months later, according to CoinDesk data. The cryptocurrency's rollercoaster ride continued on Wednesday when it hit $12,000 and surged up to $17,000 on Thursday but it fell to almost $15,000 on Friday morning.

Bitcoin, which emerged after the financial crisis of 2007- 2008 relying on certain computer algorithm, is under the control of or supported by no specific central bank or government and allows people all over the world to bypass banks and traditional payment methods for goods and services. Its ever-increasing popularity, has forced central banks, financial regulators and institutions across the globe to consider how to respond, among them stands the Central Bank of Iran (CBI).

Bitcoin is being traded in Iran while neither CBI nor any other state-run entities - including the High Cyberspace Council, the body in charge of deciding the fate of virtual currencies- has announced the cryptocurrency official yet. 

While the regulatory bodies say they are conducting affiliated studies about all cryptocurrencies and blockchain technologies, Iranians currently purchase a Bitcoin for around 650 million rials. It is traded at some bureaux de changes or via some websites and applications, which are not operating under CBI.

The central bank has, however, warned Iranians about Bitcoin regarding the potential economic, financial, operational, legal, customer protection, and security-related risks.

According to Naser Hakimi, CBI deputy governor, Bitcoin is not recognized as an official currency in Iran and people should be aware of its high risk of investment and unfixed price rate. In case of any fraud, no official body will be held accountable as there is no specific regulation about such cases in the country, Donya-ye-Eqtesad quoted him as saying last month.

The central bank is on the verge of preparing six documents about modern financial businesses to ease financial technology (finteck) in Iran, one of which addresses the issue of using virtual currencies in the country, he announced. The official informed that these documents will be prepared and released in early months of the next Iranian calendar year (starts on March 21, 2018) adding that by that time CBI will neither allow nor disallow the use of Bitcoin.
 
He added that CBI’s biggest challenge about Bitcoin is its nearly zero level of observability which may raise money laundering and pyramid scheme concerns. 

There are also some positive aspects of using digital currencies. According to the secretory of the High Cyberspace Council, Abol-Hassan Firoozabadi, Bitcoin can act as an evolutionary factor in the Iranian banking system and business environment regarding the anonymity of its users in money transactions, lack of money transfer fees, and high profit of Bitcoin mining despite its inherent risks and price fluctuations.

Hoping that CBI would devise regulations about Bitcoin and all other cryptocurrencies, Firoozabadi announced that the council is also making some research to weigh up utilizing such currencies in the country.

Meanwhile, Amir Hamooni, the CEO of Iran’s over-the-counter (OTC) market, known also as Iran Fara Bourse (IFB), is optimistic about the use of Bitcoin, saying his organization will commence using cryptocurrencies in case studies to assess their advantages and disadvantages. 

Moreover, according Iran Mercantile Exchange (IME) Hamed Soltaninejad, a working group is also being formed in IME to assess Bitcoin characteristics and its application in mercantile exchange. 

Both officials, however, admit that their organizations cannot act independently from the domestic financial and capital market and should wait for regulatory bodies to shed light on the issue via ratifying clearly-stated regulations. 

Some experts believe that Bitcoin is capable of providing Iran with a golden chance under the current circumstances when the country is faced with barriers in its financial transactions with the world and the Iranian government intends to terminate the usability of U.S. dollars in Iran and replace USD with a stable reserve currency that is more frequently used in foreign trades. Bitcoin, as they assert, is the currency able to circumvent the U.S.-led sanctions against Iran and can be a good replacement for dollar in Iran’s international financial and trade transactions.

In today's world, modern technology does not wait for new regulations, however, these are the regulations that should come up with modern technology. It is now a must for Iranian regulators to set proper bed for securing use of Bitcoin or any other virtual currency in the country via devising efficient rules and developing efficient tools for supervising online transactions.

HJ/MG

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