Cryptocurrency Regulations in Different Countries: From Complete Prohibition to Legalization
The Persian Gulf island may become a hub for cryptocurrency exchange in the region in the near future.
Iran: Minister of ICT (Information and Communication Technology) Mohammad Javad Azari Jahromi suggested turning Iran’s Kish Island in the Persian Gulf into a center for domestic and international cryptocurrency exchanges. However, politicians and decision makers have yet to announce a clear stance on cryptocurrency trading on the island.
“Kish has the infrastructure to become a hub for international cryptocurrency exchanges in the region. The authorities need to start negotiations with neighboring countries on the issue,” IRNA news agency quoted him as saying during a visit to the picturesque island and tourist resort.
To recall, the Iranian authorities banned mining Bitcoin in June 2022, except for the financial zones, which is the island of Kish. Cryptocurrency trading is also banned in Iran, although the Central Bank of Iran recently said that banks and licensed exchangers can use the digital currency, mined by authorized miners in Iran, to pay for imports.
The Kish Island Zone is a 91-square-kilometer resort off the Persian Gulf in the south of Iran that is planned to become a “free financial zone”.
Crypto miners can use the excess capacity of the power grid in the Kish Free and Special Economic Zone. Since the electricity produced on the island cannot be used on the mainland and cannot be traded, the excess generation can be used for cryptomining, like crypto miners UAE at Minery.io. Currently, twelve crypto-mining farms operate on Kish Island, in the Maku and Aras free trade zones, as well as in the Payam Special Economic Zone in Alborz province, the Shiraz-Boucher, and Rafsanjan Special Economic Zones.
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Problems of regulation of cryptocurrencies in Iran
The surge in investments in cryptocurrencies in recent months and sharp fluctuations in their prices have prompted officials to announce some measures to protect investors’ assets and prevent the negative consequences of further global fluctuations in the value of cryptocurrencies.
However, this issue is more complex than previous regulatory problems, and no government agency wants to take responsibility and intervene if problems arise, which is likely.
The High Council for Cyberspace views all cryptocurrencies as a source of concern. Abolfazl Rouhani, deputy head of the council, said the council is against the use of cryptocurrencies mined outside the country, such as Bitcoins.
“It’s unclear who developed the cryptocurrencies. We don’t have accurate information about those who invested in digital currencies. So we don’t encourage investors to put their money into digital assets,” ISNA quoted him as saying.
“Cryptocurrencies can help the country circumvent sanctions in a limited number of cases,” he agreed, but stressed that “the Central Bank of Iran should develop a clear approach on this matter.”
Last month, the Central Bank said it was in no hurry to announce new procedures for cryptocurrency exchanges and planned to develop a roadmap for managing the cryptocurrency market in cooperation with government agencies, including the Supreme Council for Cyberspace.
The media later published a letter from Mahmoud Vaezi, head of President Hassan Rouhani’s administration, asking the Central Bank not to block cryptocurrency exchanges. The call came in response to a petition signed by more than 60,000 people involved in the cryptocurrency business.
Let’s look at examples from other countries to see how a possible partial adoption of cryptocurrency could affect Iran.
The Central African Republic adopted bitcoin as its official currency in May 2022
The Central African Republic became the second country in the world to approve Bitcoin as an official currency after the cryptocurrency was not easily adopted in El Salvador last year.
A spokesman for Central African President Faustin Archange Touadera said the adoption of bitcoin would improve the country’s living conditions. The Central African Republic is one of the poorest countries in the world, despite being rich in gold and diamonds, and the country has been in turmoil for years, according to the UN.
El Salvador also declared bitcoin an official means of payment in the country in September 2021, and the Central African Republic is following in its footsteps in approving bitcoin as a legal tender. El Salvador became the first country to adopt cryptocurrency as official currency, and the government created bitcoin wallets for citizens called Chivo.
However, El Salvador’s decision to adopt bitcoin, a notoriously volatile asset, has been called a huge economic risk by many experts, as the policy has not found support among the country’s population.
In January 2022, the International Monetary Fund called on El Salvador’s government to revoke bitcoin’s status as legal tender, which the organization said: “entails great risks to financial and market integrity, financial stability and consumer protection”.
El Salvador, however, opposed the IMF recommendation. Finance Minister Alejandro Zelaya later told a local broadcaster that bitcoin use is a matter of sovereignty, and that “no international organization is going to force us to do anything at all.” Despite official defiance, bitcoin adoption in El Salvador has not gone smoothly in the past few months.
Shortly after bitcoin adoption, a survey by the Salvadoran Chamber of Commerce showed that more than 80 percent of people did not want to receive remittances in bitcoin-perhaps because of the astronomically high ATM fees for converting bitcoin to USD, and more than nine in 10 rejected the idea of receiving a paycheck in digital coins. As for business acceptance of bitcoin, a study released in March by the Salvadoran Chamber of Commerce and Industry found that 86% of businesses have never made sales in bitcoin.
In March, Salvadoran President Nayib Buquele’s initiative to issue a “volcano bond,” so named because of the plan to spend half of the bond’s proceeds on a new “bitcoin city” at the foot of El Salvador’s Conchagua volcano, was met with skepticism by investors.
If the president’s tweets are to be believed, the government’s personal bitcoin investments are down about $50 million on paper. (None of this loss will be recorded until the country gets out of its bitcoin position.) However, this is just the beginning of the journey of acceptance of bitcoin by different countries, and how long the whole journey will be is anyone’s guess.
