Central Bank of Iran officially bans the use of Cryptocurrencies

The Central Bank of Iran (CBI) has issued official statements on banning the country’s banking network, exchange offices and all other financial and monetary institutions from cryptocurrency trading.
According to the communique, at the 30th session of the Anti-Money Laundering (AML) High Council held on December 30, 2017, Trading any kind of cryptocurrencies especially bitcoin at all financial centers was banned.

The Central Bank’s Stance

In its recent announcement, the CBI mentioned: “Considering the fact that various types of virtual currencies have the potential to become a tool for money laundering and the financing of terrorism and in general, the displacement of criminals’ money resources, the central bank’s monitoring center for the prevention of crimes through virtual currencies has informed banks of the prohibition of utilizing virtual currencies in any form and/or capacity.”

The CBI continued to warn about any action against above-mentioned instructions and added: “Considering the importance of the issue, all branches and subsidiaries of banks, credit institutions and exchanges must avoid any trading of virtual currencies or any action that could potentially facilitate or promote virtual currencies. It should be noted that the any violator of these guidelines will be penalized in accordance with relevant laws and regulations.”

Bitcoin vs Central Banks

In an earlier interview with ibena, Davoud Mohammad-Beigi said: “Exchange bureaus which are licensed by the Central Bank of Iran (CBI) must not participate in form of cryptocurrency trading, as such activities are considered illegal.”

He mentioned bitcoin’s definition as a peer-to-peer system that operates with no central authority and added: “Typically Bitcoin stands against institutions such as central banks and causes conflicts. Central banks are the only authorized issuers of money and liquidity management in countries. Due to lack of information and control over public blockchains, there are persistent concerns about any backstage events that might negatively affect society as a whole.”

Cryptocurrency: Commodity or Currency

During these years Bitcoin has brought a new asset class known as cryptocurrencies into the realm of finance. Functioning as exclusively digital forms of money, cryptocurrencies facilitate both commerce and trade through the implementation of advanced blockchain technology. This versatility fosters differing views pertaining to their classification as either commodities or currencies.

As the global benchmark for cryptocurrencies, Bitcoin has drawn the attention of financial authorities worldwide. Citing concerns over security and its role in illegal enterprise, Mohammad-Beigi said: “The debate about Bitcoin’s identity as a commodity or currency is controversial. The central bank has made no official comments about this ambiguity.” then He mentioned Germany’s decision to considering digital currencies as commodities.

What is Central Bank of Iran’s Concern?

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He stated: “The CBI’s concern is that if it confirms this infrastructure, it should be responsible for it. Central banks accept the responsibility of paper money and deposit accounts in the community because they supervise them, but they cannot carry the burden of all the risks associated with a currency over which they have no control, from its publication to transaction processing. Therefore, the main argument of this network is that they don’t want to have overseers.”

He continued: “One of the main objectives of cryptocurrencies is to reduce the dominance of central banks. In the world, central banks don’t have a clear approach in this area. Technically, no one can ban Bitcoin, but they have the ability to restrict it by regulation.”

Also read: Inactivity in Blockchain’s realm turns opportunities into threats

Mohammad-Beigi went on to describe the claims of Bitcoin as a fundamental incompatibility with central institutions, saying that two main issues arise with the prominent virtual currency. First of all, it’s uncontrollable, due to its naturally decentralized structure and the fact that there are millions of miners around the world cumulatively controlling this network.

Secondly, users are anonymous in this network. This state is very much welcomed by those who want to work in areas of counterfeiting, money laundering, and whoever seeking to conduct illicit transactions in general.

CBI Moves Toward a National Cryptocurrency

Mohammad Beigi, on the approach taken by the central bank to move towards a national cryptocurrency, said: ”In the area of domestic cryptocurrencies, some countries like Russia have shown some limited activity but the issue at hand is that the questions about a national currency cannot be answered at the moment because the focus of the central bank is more on public blockchain-based cryptocurrencies.

For the interior, what is considered is the usage of the private blockchain infrastructure. Now, if we identify our position in the public blockchain-based currencies, it can be very effective in leading us to the successful creation of a national cryptocurrency.”
The Iranian minister of Information and Communications Technology (ICT) recently stated: “Inactivity in the realm of Blockchain turns opportunities into threats.”

Moreover, he claimed that “Young and experienced talents will be recognized and gathered by the Post Bank and we will establish the first Blockchain-based national cryptocurrency. Then, the central bank will assess and confirm.”

Cryptocurrency users trade and invest at their own risk

He mentioned the central bank’s supervision of the activities of some converters engaged in the Bitcoin trading and states: “The exchange offices authorized by the central bank are not authorized to conduct any activity in this area and exchanges that trade Bitcoin are not doing so legally.

Currently, the central bank of Iran has no supervision over this area, and it has been stated repeatedly that all risks related to trading cryptocurrencies are associated with the customer. However, if the central bank is going to have legislation for this area of financial exchange, then it should be announced in the bank’s regulations.”

The director of central bank payment systems further added: “So far, the Central Bank’s regulations have been silent in this area, and it has been explicitly mentioned that Bitcoin and virtual currencies as a whole do not fall under the central bank’s supervision. However, Bitcoin’s illegitimacy is revealed when it comes to legality. Now our biggest concern is customer risk.”

Read More: “The Usage of Cryptocurrencies should be executed in Iran”