Despite several years passing since cryptocurrencies became active in Iran and officials’ hesitation to engage with this sector, “crypto-assets” have now entered Imam Sadiq University.
No one is accountable for the missed opportunities!
While several years have passed since cryptocurrencies began operating in Iran, officials remain hesitant to engage with this sector seriously. However, “crypto-assets” have now made their way to Imam Sadiq University, where Abbas Ashtiani, CEO of the Blockchain Association, and Amin Amini, co-founder of Wallex, discussed the history of the cryptocurrency market in Iran and the emergence of cryptocurrency exchanges at the Banking Law Think Tank meeting held at the university. They also outlined the challenges facing this field.
At the beginning of the session on “The Status of the Crypto-Asset Market in Iran,” Abbas Ashtiani, referencing the history of the growth of the cryptocurrency market, stated: “According to definitions, whatever people accept as having ownership and value, which can be transferred, is considered an asset. Since 2009, Bitcoin, like any other asset, has existed in the world. In 2019, the International Global Auditing Institute, which Iran also follows, announced that cryptocurrencies are crypto-assets and classified them as a new asset class alongside gold, real estate, and the stock market. Like the rest of the world, our country also accepted this asset class as part of investments in three waves. In 2014 (1393), a few people familiar with crypto-assets began converting part of their assets into cryptocurrencies. In 2017 (1396), as Bitcoin’s price surged to $1,000, more people entered this space; during that time, a series of valuable businesses were born and grew. In 2020 (1399), the penetration rate of crypto-assets in Iran increased. Global statistics from Glassnode show that assets in global wallets peaked during this period.”
Missed Opportunities in Mining
He continued by providing a historical overview of the government’s response to this space: “In March 2018, the Blockchain and Crypto-Asset Regulatory Conference was held; in September 2018, we witnessed the rise of crypto businesses; in November 2018, filtering occurred; in May 2019, the filtering was lifted; in July 2019, the government rushed to address the phenomenon of mining; in August 2019, the Cabinet of Ministers issued a directive on mining; in November 2020, the directive for self-declaration of mining devices was issued; in March 2021, Shaparak’s confrontation with the exchange sector took place; at the end of 2021 (1399), the National Cyberspace Center issued a notice to review cryptocurrencies outside the traditional licensing system; in June 2021, mining was forcibly shut down by order of the then-President. Finally, the Central Bank recently unveiled a roadmap for dealing with the mining sector with a development-oriented policy. This means that from 2019 to 2023 (1398 to 1402), we experienced four years of lost opportunities in the mining sector. With five percent of the global mining share during this period, we could have produced around two billion dollars in crypto-assets, but this did not happen, and no one is accountable for it.”
A Four-Year Wasted Opportunity in Mining from 2019 to 2023
A History of Asset Exodus from Iranian Platforms
Next, Amin Amini, co-founder of Wallex, spoke about the history of internal platforms’ activities: “Crypto trading began on a limited scale in Iran in 2014 (1393); in 2016 (1395), platforms for buying and selling were created, and from 2017 (1396), engines for trading were added to platforms. The Wallex platform started operations in December 2018. The oldest crypto platforms in the world, like Bitfinex and Coinbase, began in 2013, meaning we weren’t too far behind global trends. Despite new concepts like trading and wallets, Iranian platforms managed to adapt to users’ needs and foster competition. However, crypto platforms in Iran are among the few businesses that face global competition—if users don’t trade on Iranian platforms, they can turn to foreign ones. Until 2019 (1398), when Bitcoin’s price surge hadn’t occurred yet, few users had entered the market, and there wasn’t much advertising for Iranians, although some were traders at that time. For instance 2016, with Bitcoin priced at $5,000, $800 million of Iranian users’ assets were blocked on Bittrex. After Bitcoin’s price increased, many users were drawn to the industry. At that time, foreign platforms started with massive investments, even though the future of crypto was still uncertain, leading to rapid development. However, crypto trading was banned in Iran in 2017 (1396). We missed the investment opportunity that could have made Iranian platforms competitive in the region, allowing them to advertise and attract foreign users. After that, in a lawless environment, news of bans and criminalization of the space emerged almost every week. When they announced that digital currency payment gateways had to be shut down, within four hours, $40 million worth of assets left Iranian platforms, with 90% going to foreign platforms because users felt Iranian platforms were no longer safe. Around the same time, CoinEx’s advertising in Persian increased. This was the first stage when we lost our users. Even now, CoinEx has over four million Iranian users and billions of dollars of Iranian capital there. Of course, due to the country’s circumstances, we couldn’t offer features like futures trading, which is another reason why users left Iranian platforms, but this also ties back to regulations.”
In the world, cryptocurrency exchanges are the main investors in the blockchain sector
Amini stated: “In Turkey, the BTCTurk platform started its operations in 2013. They were asked to bring their servers to Turkey and were supported, and with this infrastructure, their market share in Turkey surpassed Binance. This could have happened in Iran as well, but it didn’t. In contrast, in Iran, they ask why you focus on exchanges and not other areas of blockchain. However, globally, exchange platforms are the ones who initiate and invest in research and development. Other sectors may not generate revenue initially, but exchange platforms can generate and invest in other areas. Globally, the second largest investment area is fintech, and over a third of that investment is in crypto and blockchain, which shows the global investment trend.” He explained the activity volume of Iranian users on foreign platforms: “About 50% of people use foreign platforms, although their asset volume on these platforms is about three times higher because they trade and don’t trust domestic platforms due to legal risks. Despite the experiences with Bittrex, KuCoin, and Binance, where Iranian funds were blocked, they still accept this risk.”
When they announced that digital currency payment gateways must be closed, $40 million worth of assets left Iranian platforms in four hours.
Trading Cryptocurrencies Has No Religious Objection. According to the Guardian Council
Ashtiani referenced the Cabinet directive from August 4, 2019: “In Article 1 of this directive, it states that the use of cryptocurrencies is only permissible with the acceptance of the associated risks by the parties involved and is not subject to government or banking system support and oversight. Its use in domestic transactions is not allowed. This means that trading cryptocurrencies have no religious objection, according to the Guardian Council. The legal deputy to the president at the time said that using cryptocurrencies in domestic transactions, i.e., as payment for goods and services, is not allowed, but exchanging crypto for crypto or crypto for currency is fine. However, recently, the Central Bank has again announced that this is a violation. Also, in the fourth clause of this directive, energy tariffs for crypto-assets were declared export-based, which, apart from being a missed opportunity, caused the number of operational licenses in this sector to drop to zero for three years, pushing mining activities underground. From December 2018 to August 2019, when this sector was recognized as an industry in our country, Iran held about 8% of the global mining share, but afterward, it dropped to about 3%.” He highlighted the energy imbalance issue in Iran. He said: “At the time of this directive, miners announced that they were ready to generate a capacity of 1,000 megawatts by converting gas to electricity during peak demand periods using miners. Rejecting this proposal was foolish. On the other hand, the spokesperson for the electricity industry blamed miners for the blackouts. However, a report from the research center indicated that the cause of the blackouts was the Ministry of Energy’s debt to power plants, empty parts warehouses due to lack of currency allocation, and poor management. Today, a similar situation is unfolding. If we lose law-abiding platforms that make the market observable and reduce crimes, the alternative will be an underground market. The reason for converting assets to gold or crypto is to preserve value against inflation, and we should not punish the effect instead of the cause.” Regarding the Central Bank’s role in the mining sector, Ashtiani stated: “The Central Bank’s responsibility is to maintain the value of the national currency, control the currency market, and supervise monetary and payment functions, not to comment on or regulate the production of assets or goods.”
Cryptocurrency Crimes Haven’t Even Reached 2%
Amini highlighted the impact of cryptocurrencies on money laundering: “If we have data, we can use algorithms to detect money laundering. But we can’t detect the process if the data disappears or goes underground. Like any tool, Bitcoin can be used for money laundering, but its transparency makes it easier to track.” Ashtiani confirmed Amini’s statement, adding: “Global reports show that the use of cryptocurrencies in crimes hasn’t even reached 2% because blockchain is transparent, and even hackers are no longer using it for extortion. Cryptocurrencies are the only asset in the world that can be tracked through a wallet, whereas buying gold or coins doesn’t have such traceability.” Ashtiani further stated: “The biggest threat to the U.S. dollar is cryptocurrencies. Since 2016, the U.S. has tried to impose restrictions on cryptocurrencies but hasn’t succeeded. Instead, they started supporting domestic platforms to ensure transparency, protect citizens’ rights, and prevent crimes. Ultimately, this led to capturing market share from neighboring countries. They support the U.S.-based platform Coinbase while revoking Binance’s license.” Ashtiani also discussed using cryptocurrencies as collateral for loans, saying, “If cryptocurrencies are assets, they should be accepted as collateral. The Seventh Development Plan states that banks and financial institutions can accept intangible assets as collateral, although we have legal gaps in defining intangible assets. The problem with the startup community and the digital economy is that they shouldn’t be viewed through the lens of traditional businesses, requiring billion-dollar collateral for startups.” When asked how to prevent cryptocurrencies from being used as monetary tools, he responded: “According to the law, our monetary tool is the rial. Cryptocurrencies are a new asset class, and we should prevent their use as money, just as we did with gold, and nothing new happened.” Ashtiani emphasized: “The Supreme Leader left the handling of cryptocurrencies to the law, and in the law, we have defined crypto-money and crypto-assets. Law, strong jurisprudence, and the jurist’s guardianship (velayat-e faqih) have clarified the issue. Financial markets and any type of asset always fluctuate in value, but that’s not a reason to deny crypto-assets.”
The Biggest Threat to the U.S. Dollar is Cryptocurrencies
Restrictions on Cryptocurrencies Have Not Been Successful So Far
Amini added: “Reuters reports explicitly state that the U.S. aims to prevent the growth of crypto in Iran to mitigate the effects of sanctions. On the other hand, promoting any product in Iran often leads to sanctions on that product, but platforms like CoinEx are being advertised in Iran, and so far, the U.S. hasn’t reacted.” He discussed the experience of banning cryptocurrency activities in other countries: “Dubai banned this sector for a few months in 2016 but changed its stance in 2017, aiming to become a global and regional hub. They began investing in and welcoming global companies; now, everyone wants to operate there. Globally, fewer than ten countries have imposed bans or restrictions on cryptocurrencies, most of which are developing nations. Aside from China, a developed country that has banned cryptocurrencies, crypto activities are allowed in Hong Kong, where many companies operate. The Wall Street Journal recently reported that the biggest traders by volume on Binance are Chinese, despite the restrictions. After the restrictions in China, a report by Chainalysis showed that around $50 billion left China and entered foreign platforms.” Amini mentioned other countries: “In Nigeria, they banned cryptocurrencies, but the central bank later admitted that underground crypto activity had increased and transparency had been lost. Eventually, they decided to align with global practices and allowed crypto use. India also had a strict stance on cryptocurrencies, imposing a 25% capital gains tax, which led to $5 billion leaving the country in the first month alone. This shows that restrictions have not been a successful experience so far.”
