Iran using Bitcoin in International Trade amidst a New Wave of US Sanctions

29 Oct 2020

Iran is making headlines as the first country to enable the use of Bitcoin as a legal medium of exchange. The move will help the country deal with the tough economic climate created by US sanctions.

The US Treasury introduced a new set of sanctions against Iran earlier this week. The sanctions negatively affected the value of the country’s fiat currency; hence using Bitcoin will aid in cross-border settlements.

Iran Turns to BTC Miners

To effect this strategy, the Iranian government has changed the existing crypto regulations to allow miners to send mined cryptocurrencies to Iran’s finance sector to aid in international trades. This will ensure that importers are shielded from the rapid deterioration of Iran’s fiat currency.

The amended legislation included a joint proposal levied by the Central Bank of Iran and the Ministry of Energy. The legislation stated that the only Bitcoin that will be used in international trade is only the one that has been mined legally. The regulation also states that Bitcoin miners will be required to sell the mined BTC to Iran’s central bank.

The report also reads that the miners will supply Bitcoin directly to the central bank using the channels introduced by the regulator. The legal cap for mining Bitcoin will be determined by the level of energy a miner consumes and any further limitations imposed by the Ministry of Energy.

Iran Embraces Crypto

Iran has not always been lenient towards cryptocurrencies. Bitcoin trading was declared illegal in Iran, but the ban was lifted in August 2019. At the time, the Iranian government launches a new regulatory framework to govern the use of cryptocurrencies. Iran has since been looking into ways that cryptocurrencies can aid its economy.

The Iranian government also provided Bitcoin miners with exclusive energy to be used in the operations and discourage illegal mining. The country issued over 1000 licenses for Bitcoin mining equipment. Last month, miners were given access to three power plants.

The US dollar has for the longest time been a major currency used in international trade. However, Iran believes that it can use Bitcoin to mitigate the effects of the economic restrictions imposed by the US.

By exploring the use of Bitcoin in international trade, Iran will be the first country to use the primary cryptocurrency as a medium of exchange. This happens as other countries are researching central bank digital currencies (CBDCs).

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