It’s been a crypto whirlwind in Iran. From shutting down crypto mining farms, the Islamic Republic – a hot bitcoin farming destination thanks to cheap electricity – has now embraced it, as the world’s largest Islamic finance market engineers its way out of the suffocating clasp of US sanctions.
Make no mistake: Iran has always been vocal about its intention to create a sovereign digital currency in a bid to circumvent international sanctions led mostly by the US, and this is an endeavor frowned upon by the Donald Trump administration which in January introduced bills in an attempt to squash Iran’s national cryptocurrency dreams. But like most responsible countries, the Islamic Republic is finding its foot in these relatively unchartered waters looking for the best way to regulate this potentially powerful, yet one that could be abused, asset class.
In July, the government overturned its stance on energy-intensive cryptocurrency mining activities, shuttering farms down even as recent as in June. But Central Bank Governor Abdolnaser Hemmati confirmed that the economic commission set up by the government has approved a digital coin-mining mechanism which will later be tabled to cabinet members.
Similarly, it has been reported that the government is working on rolling out an Iranian cryptocurrency backed by gold under the supervision of the Central Bank of Iran (CBI). This is a 180 degree turn from its earlier stance beginning of the year when CBI released a draft document banning digital tokens pegged to precious metals, commodities and fiat currencies. The report also noted that any unapproved cryptocurrencies will be prohibited as a means of payment.
Amid these developments, the Iran Fara Bourse (IFB) is spearheading initiatives to develop digital token offerings as well as smart contract solutions. It has extended an invite to start-ups and technopreneurs to submit proposals outlining potential collaboration opportunities specifically in three areas the exchange has identified as core priorities: security token offerings, asset token offerings and smart contracts for financial transactions, as part of the bourse’s wider blockchain strategy. Start-ups have until the 6th August 2019 to submit blockchain proposals to the IFB.
IFB, which has been progressive in exploring, adopting and encouraging the development of new fintech solutions, has channeled resources to understand the application of blockchain over the last 18 months. The exchange, one of four in Iran, formed a blockchain committee, reporting directly to its executive board, to undertake due diligence on the pros and cons of distributed ledger technology and the viability of implementing blockchain instruments and mechanisms at a national level for the financial sector.
In February, IFN Fintech reported that the IFB was studying methods to facilitate Sukuk issuance using blockchain to ease foreign investments into its capital markets. Boasting a trading value of IRR327.05 trillion (US$7.76 billion) across its four exchanges and IRR884.34 trillion (US$20.98 billion) in outstanding Sukuk as at the end of February 2019, Iran is under the pressure of international sanctions and escalating tensions with the US to open up its financial markets to attract international dollars. One way it is doing so is by positioning itself as a regional economic, scientific and technological power by 2025.
Financial regulators such as CBI and the Securities and Exchange Organization have incorporated fintech into their development strategies and are actively engaging the start-up community to assist with bringing to market new tech-driven products as well as in engineering-related regulatory frameworks.