Iran is experimenting with cryptocurrencies to circumvent sanctions

By Dominic Dudley

Iran has begun using cryptocurrencies to settle cross-border trade transactions as the country continues to look for ways to avoid using the US dollar and the international banking system.

In a tweet on Tuesday, the head of Iran’s Trade Promotion Organization (ITPO) Ali Reza Peymanpak announced that “the first official listing using cryptocurrencies will take place this week.”

Peymanpak, who is also deputy minister of industry and trade, did not say what goods or services would be traded or who the other party is, but said the value of the transaction is $10 million.

He also stressed that the use of cryptocurrencies and smart contracts will “expand to Tehran’s foreign trade” with certain states in the near future.

In July it became known that Iran and Russia agreed to limit the use of the dollar in their bilateral tradeimplementing a settlement system in their own currencies.

In 2019, the Central Bank of Iran banned cryptocurrency trading within the country. Iran’s power grid has at times come under severe pressure from the country’s heavy cryptocurrency “mining,” leading to widespread power outages. However, the government allows the use of Bitcoin and other cryptocurrencies for international transactions as a way to circumvent US sanctions imposed on Tehran.

In January, Iran’s Mehr news agency reported that an agreement had been reached between the ITPO and Iran’s central bank to allow the use of cryptocurrencies in cross-border trade, saying at the time that the system would be operational “within the next two weeks.”

“Cryptocurrencies and blockchains have many practical applications in business,” Peymanpak commented to Mehr in January. “If we ignore them, we will miss important business opportunities.” He went on to say that “in our main markets, such as Russia, China, India and Southeast Asia, the use of cryptocurrencies is popular.”

While cryptocurrencies can be useful for Iranians trying to avoid sanctions, US authorities are taking steps to block them where they can. The New York Times reported in July that cryptocurrency exchange Kraken was under federal investigation over suspicions it had allowed users in Iran to buy and sell digital tokens. Another exchange, Binance, also faced allegations that it executed customer transactions in Iran despite international sanctions.

However, it is good for Iran and every counterparty to remember that there are risks involved in crypto trading, beyond the volatility of most digital currencies.