Iran's central bank issues draft rules on cryptocurrency

Government regulators recognise global cryptocurrencies and licensed trading but prohibit it as payment inside Iran.

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    It remains unclear when the central bank's final regulatory framework will be fully implemented [Morteza Nikoubazl/Reuters]
    It remains unclear when the central bank's final regulatory framework will be fully implemented [Morteza Nikoubazl/Reuters]

    The Central Bank of Iran has released an early draft of its regulations on cryptocurrencies, reversing a previous ban, but still imposing restrictions on the use of the digital currency inside the Islamic Republic.

    The bank published on its official website late on Monday a "Version 0.0" of its regulatory framework for cryptocurrencies, which it said is aimed at organising and defining boundaries of ongoing crypto operations in the country, and allowing traders to plan for their future.

    The announcement was made on the eve of the annual two-day Electronic Banking and Payment Systems conference, which kicked off in Tehran on Tuesday with the theme, "blockchain revolution".

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    As speculated, the central bank recognised and authorised global cryptocurrencies, including bitcoin, central bank cryptocurrencies like Iran's upcoming sovereign cryptocurrency, and regional cryptocurrencies.

    It also authorised initial coin offerings (ICOs), tokens, cryptocurrency wallets, cryptocurrency exchange bureaus and mining the process of generating cryptocurrencies through employing computing power.

    Cryptocurrency is a digital currency, the transaction of which has no central authority and offers anonymity to those using the system, wherever they are in the world.

    Its importance gained more attention in Iran, after the US reimposed economic sanctions against the country, shutting it out of the global financial system.

    When implemented, the central bank's regulatory framework will nullify last April's blanket ban, which prohibited all financial institutions from handling cryptocurrencies in an effort to prevent further capital flight amid the slump of its currency.

    Prohibitions

    However, the central bank said, "Using global cryptocurrencies as methods of payment inside the country is prohibited."

    Furthermore, in an effort to prevent more value loss of the rial, it bars Iranians from holding large amounts of global cryptocurrencies in the same way they are officially prohibited from holding more than 10,000 euros.

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    That part of the proposed regulation is seen as the most consequential part of the framework, and which garnered immediate reactions from Iran's crypto-community.

    "The ban on using internationally accepted cryptos as payment methods can negatively affect the work of me and many like me," cryptocurrency trader Perhman Azhdarpour told Al Jazeera.

    "We were hoping the central bank's stance would not again restrict the use of bitcoin and other cryptocurrencies in any way," said the 28-year-old trader.

    Mohammad Javad Azari Jahromi, Iran's information technology minister who attended the electronic banking conference on Tuesday, called the bank's draft regulations "a move in the right direction".

    However, he noted some of the restrictions "might not be well-received by crypto players".

    Nasser Hakimi, the central bank's deputy governor for innovative technologies, assured attendees of the conference the draft regulations are still subject to changes based on feedback from the community.

    $10m daily transaction

    But whether or not Iran allows the use of cryptocurrencies as a payment method inside the country, Soheil Nikzad, board member of the Iran Association of Blockchain, said around $10m worth of bitcoin transactions are already conducted in Iran every day.

    Beyond global cryptocurrencies, the bank has allowed development of digital currency wallets by both real and legal persons. Furthermore, it has officially recognised cryptocurrency mining as an industry.

    The regulator's draft regulatory framework also said that digital tokens can only be operated by certified banks, and can be traded in licensed crypto exchange bureaus. Tokens that are not backed by the national currency, the rial, cannot be utilised as methods of payment.

    The central bank has also ruled that sovereign rial-backed cryptocurrency and future regional cryptocurrencies are to be operated exclusively by the central bank.

    Licensed cryptocurrency exchanges will also be obligated to implement full anti-money laundering and "know your customer" regulations, and will be solely responsible for safeguarding people's money.

    In line with this, the central bank warned cryptocurrency traders to use them cautiously and at their own risk.

    It is yet unclear when the central bank's final regulatory framework will be fully implemented.

    SOURCE: Al Jazeera News