The Central Bank’s Director of Public Relations tweet contradicts the direction that the legislator, with its previous efforts to recognize and regulate emerging phenomena like crypto assets (cryptocurrencies), has taken responsibility for leading.
In recent years, the approach to emerging and multifaceted digital platform phenomena has been one of the most significant challenges for governments, including Iran and its Central Bank. One of the key aspects of regulating these phenomena is precisely understanding the relationships between parties and the execution mechanisms of these platforms. Often, regulatory authorities’ lack of attention to this issue leads them to mistakenly accuse the parties involved in a platform of illegality based on a misunderstanding of legal relationships. Sometimes, misinterpretation of traditional laws and regulations exacerbates the situation. A strange event recently occurred when the Central Bank’s Director of Public Relations tweeted that securing cryptocurrency (crypto assets) as collateral for loans without the Central Bank’s authorization was illegal. However, he provided no legal documents or reasoning to support his statement. It is important to examine this issue from a legal perspective.
The granting of loans for the acquisition of goods and services is common and is usually offered with special benefits regarding the amount and repayment terms. Whether these loans are granted by a bank or other parties, the lenders are responsible for managing the risk of borrower default and must offer appropriate solutions. Typically, this risk is managed by requiring suitable collateral from the borrower, with one of the most common methods being the introduction of a guarantor who guarantees the borrower’s obligations.
The rights and obligations of the guarantor and the guaranteed party are based on their mutual agreement, and the lender has no authority to interfere in this agreement. The terms of the guarantee contract (where the guarantor assumes responsibility for the debtor’s obligations) follow the parties’ will, depending on whether their personal relationship negates the need for collateral or requires it.
With the emergence and development of new phenomena, as mentioned at the beginning of this article, the assets individuals use as the basis for deciding on the type of collateral in guarantee contracts have changed. One such asset is the crypto asset (cryptocurrency) owned by the guaranteed party, which can be introduced as collateral with the guarantor’s consent. Like any other agreement between individuals, this is valid as long as it does not contradict the law.
Crypto assets (cryptocurrency) owned by the borrower can be presented as collateral with the guarantor’s approval, and this collateral is considered valid as long as it does not explicitly violate the law.
Given these explanations, the Central Bank’s Public Relations Director’s tweet contradicts the legislator’s previous efforts to recognize and regulate emerging phenomena like crypto assets (cryptocurrencies).
Tweet from the Central Bank’s Public Relations Director
The tweet by Mostafa Ghamari Vafa, Director of Public Relations of the Central Bank, suggests that securing a Rial loan with cryptocurrency is considered illegal. But what is the legal basis for this claim? Based on Articles 36, 169, and Clause 4 of Article 156 of the Constitution of the Islamic Republic of Iran, the principle is that crimes and punishments must be legal. According to rational and Islamic jurisprudence principles, such as “the rule of no punishment without prior notice,” no behavior can be deemed a crime, and no punishment can be enforced unless the legislator has previously defined that behavior as a crime and prescribed the subsequent punishment.
The prohibition on using cryptocurrencies exists only when they are used as a payment tool in transactions; otherwise, there is no general prohibition on their use.
In this regard, and considering that verifying the tweet’s accuracy cannot be achieved without referring to the actual laws and regulations, we present the results of our review. Among the laws related to cryptocurrencies that can definitively confirm the full alignment of the subject of “cryptocurrency collateral” with the text of the laws and regulations is the Cabinet of Ministers’ decree No. 58144/T55637H. This decree explicitly recognizes the general use of cryptocurrencies and only prohibits their use in exchanges as a means of payment, nothing more! In other words, the prohibition of cryptocurrency use applies when cryptocurrencies are used as a payment instrument and a medium of exchange in transactions. Otherwise, there is no general prohibition on using cryptocurrencies, and the law does not explicitly impose any further restrictions on their use. This interpretation is also derived from the diverse instances of lawmakers dealing with cryptocurrencies in the context of laws and regulations. What can be definitively stated is the lawmakers’ effort to regulate the emerging phenomenon of cryptocurrencies, considering their undeniable impact on various aspects of human life, rather than outright banning or criminalizing them.
The existing laws and regulations support this claim and provide clear evidence that misunderstandings should not lead to labeling positive changes as violations, mistakenly disturbing societal peace.
