Iran Modifies Cryptocurrency Regulations, Building Bitcoin Reserves?

In late October, Iran Daily reported that the Iranian government had amended its cryptocurrency regulations to allow “digital assets to be used exclusively for imported goods at a time when pressure is growing on the country’s normal use of hard currency.”
In practice, this means that Bitcoin and other cryptocurrencies officially mined under government supervision will have to be provided directly to the Central Bank of Iran (CBI) within authorized limits, which are determined in part by the amount of subsidized energy used by miners.
“Miners should provide the original cryptocurrency directly within the authorization of the channels introduced by the Central Bank of Iran.”
Iran <br />The report did not clarify how the Central Bank of Iran purchased cryptocurrencies or at what price, but the government is likely buying Bitcoin at below market prices.
This latest update on Iran’s policy has emerged as one of the most interesting key aspects of the global cryptocurrency landscape:
Last year, Iran legalized cryptocurrency mining and put in place strict regulations to control the practice.

With its oil reserves and relatively cheap electricity, Iran can provide heavily subsidized power to miners and offset much of the cost of mining cryptocurrencies like Bitcoin for companies that play by the rules.

Alternatives to fiat currencies like the U.S. dollar are attractive to Iran’s power, as economic sanctions from countries like the United States largely prohibit transactions between Iran’s own currency and the world’s reserve fiat currency.

As the Iranian rial suffers from hyperinflation, Iranians are looking for an alternative way to store value.
To get a clearer picture of what the latest developments in Bitcoin mean in Iran, I reached out to Ziya Sadr, a Bitcoin holder living in Tehran who has never left the country because the government “wouldn’t give him a passport.” I also spoke with Omid Alavi, CEO of Vira Miner, who has a mining license and operates a legal Bitcoin mine in Iran.

Is Iran Building Up Bitcoin Reserves?
Since the latest amendment forces regulated miners to provide their BTC to the central bank, many in the Bitcoin community speculate that the country is building up Bitcoin reserves. Bitcoin would be a powerful tool to not only exit its failed fiat currency system but also to circumvent international sanctions. But both Allawi and Sadr have denied this view.
"The government has no interest in acquiring Bitcoin, and this attitude is not limited to Iran," Allawi said. Most central banks around the world are not interested in accepting the risks and volatility of Bitcoin.
Sadr echoed this view while stressing that he did not have any inside information about the CBI's actual plans.
“I don’t think the central bank will touch Bitcoin in any way.” Sadr speculated that the government will set up a cryptocurrency management system similar to its foreign exchange management system, known as NIMA. The system will only provide rates and other information, and Bitcoin will be transferred directly from sender to receiver. “The Central Bank of Iran controls the NIMA exchange rate and facilitates foreign exchange conversion, but does not build foreign exchange reserves through it.

Will the new rules discourage Bitcoin miners?
Sadr noted that the latest amendment could solve problems for the country’s regulated Bitcoin miners, who face challenges from the government when they try to sell the BTC they are rewarded with. He believes this is not a restriction for miners, as they must sell their Bitcoin to the government to finance imports. He believes this is beneficial because miners now have a clear channel to sell cryptocurrency in an approved manner. However, this does not apply to the majority of Bitcoin miners operating in Iran and may not have much of an impact overall.
"Most miners do not engage in official and regulated mining activities, so it may not be relevant to most miners," Sadr said. "Some very few miners who try to formally conduct mining operations in a fully regulated manner may need this new regulation."
Alavi, on the other hand, hopes that the latest amendments will prevent cryptocurrency mining operations in the country.
He said: “Due to the high electricity and gas prices for obtaining cryptocurrency in Iran, the result of this decree change would be to reduce Bitcoin production in Iran, as no miner would be interested in providing Bitcoin to the government at this price.
Allavi added that Iran’s bitcoin mining industry is “very limited,” with reports suggesting there are only 14 legal mining centers in the country.

Bitcoin’s Prospects in Iran <br />Although the government itself has little interest in acquiring Bitcoin and the legal mining industry is small, Sadr is optimistic about Bitcoin’s growth among ordinary Iranians. He points to the country’s fundamental economic problems as the main driver, noting that a smartphone could cost an Iranian eight or nine months’ salary. He shared anecdotal evidence of a growing number of people using Bitcoin to send money to family members in Iran and to store value, moving away from more traditional store-of-value assets like gold, which are targeted by criminals.
“In terms of income and taxation, it is much better to use Bitcoin than the Iranian fiat currency, and people have now understood this,” Sadr said. “I expect Bitcoin to take a larger share of such economic activities… In terms of inflation, people will have no choice but Bitcoin.”
Sadr noted, however, that he does not see an official “bitcoin industry” in the country, and that the exchanges and mining operations that do exist are better described as individuals who have chosen a safe haven rather than formal groups.
This outlook appears to be reinforced by the Iranian government’s latest regulations, which simultaneously formalize the production and subsidies of cryptocurrencies, but also place them under highly stringent supervision and restrict their use. This momentum appears to have stifled a burgeoning bitcoin industry that might have emerged in a mature field and found application, rather than encouraging it.
"So far, the Iranian government has not shown any real interest in supporting the crypto mining industry, having only approved one or two weak resolutions, most of which are propaganda," Alavi explained. In general, the cost of mining Bitcoin in Iran is very high and there is no economic rationale. Currently, the amount of Bitcoin mined is so low that it cannot meet the foreign exchange needs of the factory. (OKEX Intelligence Bureau)