As official entities recognized cryptocurrencies and the government’s need for foreign exchange, the outright ban on cryptocurrency exchanges shifted to the permitted use of mined cryptocurrencies for imports.
Review of the Cabinet’s Amendment on Cryptocurrencies
With the widespread use of cryptocurrencies and the absence of specific legislation in this area, the Cabinet of Ministers, leveraging the legal authority granted by Article 138 of the Constitution, approved Resolution No. 58144 dated 08/04/2019 regarding the legal status of cryptocurrencies. This action clarified the previously ambiguous status of cryptocurrencies to some extent and indicated that the government has officially acknowledged this phenomenon.
In the government’s first resolution regarding cryptocurrencies, given the country’s circumstances at the time, particularly the significant electricity shortages, more attention was given to cryptocurrency mining. Additionally, due to past experiences and the lack of readiness among governmental bodies, the government, in clause (1) of the resolution, placed the responsibility for the risks associated with using cryptocurrencies on the parties involved and declared their use in domestic transactions illegal. Furthermore, in Article (6) and its note, the government recognized cryptocurrency mining units as industrial production units. It stipulated that if these units export their mined cryptocurrencies and repatriate the foreign currency earned following Central Bank regulations, they would be subject to a zero tax rate. Based on this ruling, the government anticipated that miners would export their cryptocurrencies and bring the equivalent foreign currency into the country. This provision identified cryptocurrencies as export commodities, whose use in domestic transactions remained prohibited.
The novelty of cryptocurrencies, combined with a lack of awareness and preparedness from official entities and public acceptance of cryptocurrencies, led the government to officially recognize cryptocurrencies and prohibit their use in domestic transactions in its first regulation.
A year after the first resolution, the Cabinet of Ministers, in Resolution No. 86573 dated 10/21/2020, added a clause to section (1) of Resolution No. 58144, stating that legally mined cryptocurrencies could only be exchanged to provide foreign currency for national imports and following Central Bank regulations. These cryptocurrencies must be offered through the channels designated by the Central Bank. Notably, this resolution also mandated that the Ministry of Energy draft guidelines on the permissible amount of mined cryptocurrencies exchangeable by each mining unit based on their energy consumption. With this resolution, the exchange of cryptocurrencies for a specific purpose was authorized for the first time, and the general ban on cryptocurrency exchange was partially lifted. However, the regulations related to this were not officially announced by the Central Bank or the relevant channels. Additionally, the Central Bank again avoided taking responsibility for cryptocurrencies, transferring the duty of drafting regulations to the Ministry of Energy.
Drafting of Comprehensive Cryptocurrency Legislation Still Unfulfilled
Three years after the first resolution by the Cabinet of Ministers and amid discussions of drafting a comprehensive cryptocurrency bill by the government, as well as a draft proposal by parliamentary commissions—neither of which have yet been finalized or officially published—a cryptocurrency mining regulation (No. 151455) was approved on 13 November 2022. This regulation was intended to address legal gaps in the cryptocurrency sector until Parliament could pass the comprehensive law. So far, only the section related to cryptocurrency mining has been approved. The cryptocurrency mining regulation, based on Article 85 and Article 138 of the Constitution of the Islamic Republic of Iran regarding the responsibilities of the Speaker of Parliament, faced objections from the Committee for the Review of Government Resolutions for Compatibility with Parliamentary Laws. After several revisions between the executive and legislative branches, the amended mining regulation was finally approved on 9 August 2023. Currently, the cryptocurrency mining regulation and Articles (1) and (2) of the resolution on using cryptocurrencies are the valid regulations governing this domain.
Using the legal framework of Article 138 of the Constitution, the government has attempted to address the legal gaps concerning cryptocurrencies. The first resolution by the Cabinet of Ministers in 2019 marked an important step in defining the legal status of cryptocurrencies in the country.
The cryptocurrency mining regulation introduced some innovations compared to previous rules. For the first time, the regulation included definitions of distributed ledger technology (DLT), digital assets, and cryptocurrencies. This broader and more precise perspective allowed for recognizing cryptocurrencies and other digital entities such as NFTs. Moreover, the regulation acknowledged the function of cryptocurrencies as a store of value, emphasizing this role. In Article (5), to address the concerns of Parliament, the term “creation” was replaced with “production” in the definition of cryptocurrency mining. This change reflects the belief that the “creation of value” is, like the creation of money, the exclusive domain of the Central Bank, whereas “production of value,” similar to the production of goods, falls within the jurisdiction of the Ministry of Industry, Mines, and Trade. Thus, cryptocurrencies are treated as commodities. In Article (6), mining centers are defined, and according to the amended resolution, individuals are also allowed to mine cryptocurrencies. This change aligns with the constitutional right to choose an occupation under Article 28 and corrects the previous exclusion of individuals from mining activities while safeguarding public rights. Article (7) defines large-scale cryptocurrency mining centers. Establishing these centers and offering hosting services enables individuals and legal entities to monitor smaller-scale and dispersed mining operations. The amendment rightly placed the responsibility for creating these centers on legal entities, ensuring stronger legal enforcement mechanisms for the government and facilitating access to legal benefits. Article (2) initially stated that “any activities related to cryptocurrency mining, including importation, production, sale, and repair of equipment” required a license from the Ministry of Industry, Mines, and Trade. This broad scope also extended to activities like cryptocurrency exchange. However, to meet Parliament’s view that cryptocurrency mining falls under the Central Bank’s responsibilities, the phrase “any activities” was removed, limiting the Ministry’s jurisdiction to only the import, production, sale, and repair of mining equipment while remaining silent on other activities. This effectively maintained the Central Bank’s previous position. Additionally, Clause (6) of Article (2)conflicted with the regulations of the Anti-Smuggling Task Force regarding immediate registration of equipment, as amended. The newly added Clause (8) marks the first step toward the Central Bank assuming responsibility in the cryptocurrency sector, with the Central Bank designated as the “authority” responsible for setting the permissible limit on cryptocurrency mining in the country. Interestingly, the Cabinet’s resolution emphasized “authority” to eliminate doubts.
Collaboration Between Central Bank and Ministry of Industry for Establishing Cryptocurrency Mining Infrastructure
Clause (2) of Article (7) of the regulation originally required the Central Bank to collaborate with the Ministry of Industry, Mines, and Trade (Ministry of Industry) to develop the infrastructure for supplying cryptocurrencies from mining centers and to draft the guidelines for foreign exchange obligations and access to supportive tariffs. The Central Bank was therefore designated as responsible for creating the necessary infrastructure for handling cryptocurrencies. However, Clause (2) was revised to state that: “The Ministry of Industry, Mines, and Trade, in cooperation with the Central Bank, must establish the necessary infrastructure for registering and utilizing newly-mined domestic cryptocurrencies for import purposes in the relevant system. Subsequently, the Central Bank is obligated, within three months of the date of this regulation’s issuance and after the infrastructure is in place, to draft and issue guidelines for the use of newly-mined domestic cryptocurrencies for imports, in line with the Central Bank’s foreign exchange commitment regulations and instructions.” With this amendment, the responsibility for creating the infrastructure for registering and utilizing newly-mined domestic cryptocurrencies was transferred to the Ministry of Industry, with the Central Bank acting as a collaborator. As a result, the Central Bank once again distanced itself from direct responsibility for handling cryptocurrencies, positioning the Ministry of Industry as an intermediary for these transactions. Additionally, only newly-mined domestic cryptocurrencies can be exchanged, and their use is strictly limited to import purposes. The guidelines for using these cryptocurrencies must be drafted and issued after the infrastructure has been established, effectively linking the release of these guidelines to the creation of the necessary system. Thus, the government’s cryptocurrency policy has shifted from an initial total ban on domestic exchanges to conditional and regulated usage. As part of addressing economic needs, particularly for foreign currency reserves, cryptocurrencies are now viewed as a form of currency for imports. In the future, importers can use cryptocurrencies within the framework of the Central Bank’s foreign exchange commitment regulations.
As official institutions have gained more understanding of cryptocurrencies and the government’s need for foreign currency has grown, policy execution has shifted. What was once an outright ban on cryptocurrency transactions has evolved into regulated and conditional use of newly mined domestic cryptocurrencies for imports.
Establishing mechanisms and systems for accepting cryptocurrencies by the Ministry of Industry, Mines, and Trade (Ministry of Industry) could serve as a precursor to integrating cryptocurrencies into the country’s economic, monetary, and banking systems. By starting with the exchange of cryptocurrencies for imports, the strengths and weaknesses of this approach will gradually become apparent, and its technical and economic advantages, such as using cryptocurrencies as collateral, will gain attention. As governmental systems and related infrastructure become more connected, cryptocurrencies could eventually be used in other areas of citizens’ daily lives. However, it’s important to note that the Central Bank has thus far avoided taking direct responsibility for cryptocurrencies through various methods. By delegating responsibilities to other agencies, it has preferred to maintain indirect and behind-the-scenes control, leaving issues like cryptocurrency exchange unresolved and ambiguous while benefiting from certain aspects of cryptocurrencies, such as the provision of foreign currency. This inconsistent policy has kept the legal status of cryptocurrencies in a state of uncertainty.
A review of regulations shows that from the government’s first regulation on cryptocurrencies to the approval and amendment of the cryptocurrency mining regulation, the Central Bank has been reluctant to take direct responsibility for cryptocurrencies. Instead, it has shifted the responsibility to other official bodies, such as the Ministry of Industry and Energy. While trying to prevent the development and use of cryptocurrencies in domestic transactions, the Central Bank has sought to benefit from them, particularly for foreign currency provision.
