Bitcoin And Iran: The Aftermath

In the aftermath of Trump’s monumental decision to withdraw from the so-called "dangerous and defective" Iran deal, the news sent yet another tremor through the crypto-arena.

Trump’s landmark speech caused an initial overnight spike in Bitcoin’s (BTC) value from $9,196.13 on May 8 to $9,242.27 on May 9. We can see from CoinWatch that BTC is now trading at $9,354.

Evidently, the news of the withdrawal from the Nuclear Pact and decision to re-impose the pre-2015 sanctions has ignited a chain reaction around the globe. Many were left pondering what’s next as Trump offered no alternative agreement to curb Iran’s nuclear efforts. Some were plagued with panic that the news would plunge the Middle East even closer towards an impending war, while Iran and other European powers scrambled to save the remnants of the historic deal.

Iran’s Knee-Jerk Crypto Reaction

As the news of Trump’s decision rippled around the world, Mohammad Reza Pourebrahimi, the Chairman of the Economic Commission of the Parliament broke the news that ‘Iranians have sent more than $2.5 billion out of the country to purchase cryptocurrencies with.’

Since Iran is now threatened once again with political uncertainty and crippling pre-2015 economic sanctions, it evidently brought to light how Bitcoin is not regulated by political factors. Forbes contributor Billy Bambrough reinforced how in the face of a possible economic crisis, people are turning to Bitcoin to get money out of Iran. In the future, crypto could therefore could take on a new relevance for regimes like Iran and make it more of a safe haven for the Iranian economy.

This is a dramatic change from a report in April that the Central Bank of Iran (CBI) planned to impose a unilateral ban on banks and financial institutions dealing with cryptocurrencies. This was evidently due to concerns that crypto is not regulated, so can be a hotbed for ‘money laundering and terrorism financing risks.’

Nevertheless, in an effort to tighten the regime’s grip over cryptocurrency and allow it to be more strictly regulated, on April 28 Mohammad Javad Azari-Jahromi, Iran’s Information and Communications Technology (ICT) Minister, confirmed that Iran has been testing a model for its own local cryptocurrency. However, this has yet to be confirmed by other sources.

Meanwhile, there have been signs that cryptocurrency has already become more relevant for many subversive sectors of Iranian society. Mohammad Reza Pourebrahimi indicated Iranians were already trading in digital currencies abroad and "had transferred $30 billion out of the country over the few months ending March." He reasoned that since "Iranians do not have access to the international banking system, transfers can only occur through…exchange dealers or international travellers."

Pourebrahimi brought to light how cryptocurrencies could become more relevant for Iranians now to help evade the crippling US economic sanctions. He emphasized how digital currencies "can pave the path for multilateral currency swap agreements between Iran and countries" that are happy to cooperate with them. This reiterated Azari-Jahromi’s declaration that since all cryptocurrencies are not under the "supervision of the US financial regulator" they "have the ability to circumvent sanctions."

What does this signal for Bitcoin?

With the reports surfacing of Iran’s emerging national cryptocurrency and more Iranians opting to trade in digital currency abroad, Bitcoin could play a more central role for Iranians.

At the same time, the fact that Bitcoin bounced overnight also indicates that in times of upheaval cryptocurrencies provide an intriguing alternative to traditional market trading. Commentators such as FX Street Blogger Manoj B Rawal noted that "Bitcoin quickly moves up as soon as the U.S. President Donald Trump announced his decision to withdraw from the Iran nuclear deal, in a sign that Bitcoin is still considered as safe-haven among many traders and investors and prefer to take shelter in times of uncertainties and risk-off."

Article by Jenny Lynton

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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