Iran finalizes mechanism to use cryptocurrencies in foreign trade

The Central Bank of Iran and the Ministry of Industries, Mining and Trade have reached an agreement to link the CBI crypto platform to the Comprehensive Trade System, which allows businesses to make use of cryptocurrency to settle payments to international partners.

Alireza Peyman-Pak, the head of the Trade Promotion Organization of Iran, made the announcement on his social media on Friday, stating that the mechanism has been finalized in a meeting of the Industry, Mining and Trade Ministry, and Central Bank of Iran (CBI) joint foreign currency working group.

The Iranian government approved cryptocurrency mining as an industrial activity in 2020, after which numerous companies started mining cryptocurrency across the country thanks to the extremely low-cost electricity. It currently allows cryptocurrencies such as Bitcoin to be mined by units while requiring them to sell crypto to the CBI. These cryptocurrencies can then be used to pay for imports, reducing the chances of suppliers being punished by the U.S. because of the sanctions imposed on Iran.

In January 2020, the Iranian Ministry of Industry, Mining, and Trade issued more than 1,000 licenses for cryptocurrency mining units.

The proposed legislation called “Supporting Cryptocurrency Mining and Regulation of Domestic Cryptocurrency Trade,” obliged CBI to regulate cryptocurrency transactions at the national level while calling on crypto-mining farms to declare their assets to CBI.

The legislation authorized the Industry Ministry to supervise cryptocurrency mining in the country.

The ministry would license, supervise and support companies mining international cryptocurrencies aiming at raising $500 million in cryptocurrency for the state in the next Iranian calendar year (starting March 21, 2022) and increase this by 10 percent a year.

“We are finalizing a mechanism for operations of the system. This should provide new opportunities for importers and exporters to use cryptos in their international deals,” IBENA quoted Peyman Pak as saying.

Although Iran seems to recognize the value of crypto, it also sees the direct impact on crypto mining. Currently, Iran is home to 4.6% of miners globally. Recently, Iran has banned the mining of bitcoin and cryptocurrencies to save power as it requires so much power that it is said to be putting a strain on electricity grids. Unlicensed miners account for the largest share of crypto mining in Iran and authorities are trying to crack down on any illegal entities. The ban on mining will stay in place until March 6th and will help to alleviate pressure on the energy reserves of the country.