With the local rial losing its value and an increasingly difficult environment to do cross-border business due to persisting economic embargoes, the Iranian government has established a regulatory pathway to start paying for imports with virtual currencies to sidestep these barriers.
An official government statement has confirmed that the Iranian cabinet has amended regulations to allow digital currencies to be redirected into the Central Bank of Iran (CBI)’s funding mechanisms for imports.
This comes amid inflation in the Islamic Republic reaching 27.2% last month; on average, families in Tehran have reportedly paid 41.2% more for the same package of commodities and services in October as compared with the month before. Inflation in urban areas stood at 41.3% while in rural areas, it hit 42.2%. CBI projects the annual inflation rate for the calendar year ending the 20th March 2021 to be 22%. The country’s high inflation has been attributed to US-led sanctions and economic mismanagement, among others.
It has been quite a crypto journey for Iran: at one point, like many other countries who did not understand the asset class at that time, the Islamic Republic was shutting down crypto mining farms, which have mushroomed due to its cheap electricity. However, it has since embraced cryptocurrencies as a means to escape the suffocating grip of international sanctions: from regulating cryptocurrency mining to its bourses — namely Iran Fara Bourse — spearheading initiatives to develop digital token offerings. The government has also been vocal about its intention to create a sovereign digital currency.