Falling Rial, New Policy Spur Iran Bitcoin Bull Market
The price of BTC in Iran rose sharply on Wednesday after the government of President Hassan Rouhani approved plans to mainstream bitcoin mining – and as the local currency nosedived.
BTC hit a world record $24,000 on the Iranian exchange EXIR, eclipsing its previous high of $20,000, as investors piled into the digital currency in search of a safe haven against the falling rial.
EXIR tweeted that “bitcoin bull markets already started in Iran as rial price goes down against USD.” The rial is trading at around 138,000 against the US dollar on the streets of Tehran, according to a Reuters report, about 230 percent above the official rate of around 42,000.
Iran Embraces Cryptocurrency Mining
On Tuesday Iran announced that it will officially start to recognise the mining of bitcoin and other cryptocurrencies as an industry within three weeks. The Central Bank of Iran, which overseas foreign exchange and monetary policy, is to draft a policy framework for the industry, said Abolhassan Firouzabadi, Secretary of Iran’s Supreme Council of Cyberspace.
Firouzabadi told IBENA – a specialised news agency in banking and economy, which is affiliated to the Central Bank of Iran – that deepening the use of cryptocurrencies is envisaged to smooth trade between Tehrain and its partners, especially in the wake of renewed US sanctions. “But the final policy for legislating it (crypto mining) hasn’t been declared yet,” said IBENA.
The Iranian BTC price broadly reflects the gap between the official exchange rate and the one on the street, a reflection of the inflationary pressures building up in an economy under US sanctions. At $24,000 BTC in Iran is trading at a premium of about 240 percent to the global average. Coinmarketcap.com quoted bitcoin at $7,017, at press time.
According to the EXIR tweet, the price in the Islamic republic has soared about 40 percent in the last three weeks, rising much faster than the global average. It’s not a stampede, but the declining rial, together with the changes in bitcoin policy, and some speculation, have prompted a spike in demand.
Iran, the world’s third largest oil producer, is hoping to leverage cryptocurrencies to compensate for the expected squeeze in petrodollars arising from US economic sanctions designed to cut oil sales from the country, the economy’s lifeblood.
Iran will not be the first country to try and use cryptocurrencies to deflate the effect of economic sanctions. In February, Venezuela issued a digital currency of its own called the petro, which is claimed to be backed by oil. But the petro appears to have run into trouble. Recent media reports suggest that the currency has found no takers, and the oil that was meant to back it up on a one to one basis with each barrel just isn’t there. The US has responded by banning its citizens from investing in the petro.
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