Interview with the Secretary of the Cryptocurrency Task Force of the Government Transformation Headquarters
The National Cryptocurrency Task Force was established after the issue of cryptocurrencies was addressed in the Government Transformation Document. It aimed to coordinate the relevant agencies.
The Details of the National Cryptocurrency Task Force
The National Cryptocurrency Task Force was formed after the Government Transformation Document thoroughly and separately addressed the issue of cryptocurrencies. Its purpose is to serve as a coordinator for the relevant agencies involved. Although the Cryptocurrency Task Force is still far from achieving a legal status as the final authority for cryptocurrency activities, it is encouraging that after years of regulatory delays and policy stagnation, blockchain technologies and cryptocurrencies in Iran have reached a stage where high-ranking officials, in line with other countries, are considering regulation and legislation instead of imposing bans. If this initiative reaches the implementation stage, the hope will materialize into a tangible reality.
The Thirteenth Government published the “People’s Government Transformation Document” in Esfand 1400 (February-March 2022). In the fourth section of the second chapter of this document, the topic of “cryptocurrencies” is addressed. The investment-related targets in cryptocurrencies emphasize positioning Iran among the top countries in the region in attracting foreign investment for distributed ledger technology applications. In terms of mining, it discusses the development of commodities with optimal yield (based on energy intensity), increasing electricity exports, and managing consumption. Regarding the domestic market and trading, it mentions purifying and preventing corrupt practices in monetary, commercial, and foreign exchange areas, preserving the value of the national currency, and increasing market share in the custody and exchange of cryptocurrencies. On the international market and foreign exchange, it addresses enhancing settlement and guarantees in global trade and exchanges based on innovation and the applications of distributed ledger technologies. Normally, prohibition is the first step in countering new technologies, but the government’s attention to the capacities of cryptocurrencies, if implemented, is noteworthy.
Furthermore, the document highlights the challenges cryptocurrencies face. It points to weaknesses in the macro management of cryptocurrencies, the high investment risks for the public in the cryptocurrency market, the increasing share of hidden mining from the total cryptocurrency production market in the country, and the loss of opportunities to leverage cryptocurrencies’ strategic capacities in internal and international payment and exchange sectors as challenges discussed in this document. The factors that could create these challenges are also detailed, followed by strategies to address these challenges.
Regardless of how achievable and realistic these targets are, it is significant that the government has attempted to recognize and formalize blockchain and cryptocurrency activities instead of denying the substantial advancements in modern technologies or simply ignoring the issue, which would squander Iran’s international positioning. However, it cannot be denied that paper-based programs are only part of the policymaking process, and until these programs reach the implementation stage, policymaking remains incomplete.
Philosophy Behind the Formation of the National Cryptocurrency Task Force
We interviewed “Mohsen Rezaei Sadrabadi,” the Secretary of the National Cryptocurrency Task Force, about the activities of the task force, and the details of this conversation are presented below.
Rezaei explained the philosophy behind the formation of the National Cryptocurrency Task Force, stating that, as mentioned in the Government Transformation Document, its purpose was to create coordination among agencies to ensure a unified and consistent policy in the cryptocurrency sector. The goal of establishing this task force, which primarily has a coordinating and supervisory role rather than a legislative one, was to prevent isolated and diverse policies in this area and to ensure a serious and principal path is pursued in the cryptocurrency sector. This task force’s main legal and regulatory backing was the Government Transformation Document and the presidential decree. The task force was established after the Government Transformation Document was issued, and numerous meetings have been held since then. Before the decree, the organization of cryptocurrencies had already been assigned to the Economic Deputy, Mr. Mohsen Rezaei, by presidential order.
Regarding the outcomes of the Cryptocurrency Task Force, Rezaei stated that perhaps the most significant achievement of this task force has been that previously, the policymaking in the cryptocurrency sector lacked a unified approach. Still, almost all agencies have reached a consensus on the need to regulate and organize this field as soon as possible. Therefore, there is no doubt that the cryptocurrency sector needs to be organized; the notion that this sector should be entirely prohibited has dissipated after multiple meetings. However, there are still disagreements on methods of organization, and the meetings held by the task force aim to resolve these disagreements. One of the practical outcomes of this task force is that, besides establishing a unified approach, two documents have been prepared, including the document on the extraction of cryptocurrencies, which was approved last year. Revisions have also been made this year, and the Council of Ministers has ratified it.
In the previous government, cryptocurrency mining was limited to gas and electricity
He explained the outcomes of this document: One of the previous government’s policies was to restrict mining to gas and electricity supply. Since we faced issues with gas and electricity supply, energy provision was suspended for a period, and no mining occurred. In the extraction document prepared by the cryptocurrency task force, we identified seven energy supply sources: two from gas and electricity and the rest from renewable energy, energy efficiency, and flare gases. Changes also occurred in pricing; the previous resolution included export rates, which incorporated added value and electricity and gas supply charges on the bills. This meant that domestic operators were charged service fees and value-added tax in addition to the export rate. We only receive the export rate without additional charges or taxes when we export gas. Therefore, we eliminated the charges and taxes, which accounted for about 25% of the electricity bill costs, effectively adjusting the rates. Another aspect amended in this resolution was the use of cryptocurrencies for imports. We facilitated the use of cryptocurrencies for imports, and it was decided that the Ministry of Industry, Mine, and Trade would handle this. He continued: The second document prepared, besides the cryptocurrency extraction industry, is the document for organizing the entire cryptocurrency ecosystem, which is currently undergoing revisions and finalization. This document had been finalized and sent once; however, we could not complete it due to existing disagreements. The combination of these two documents encompasses all activities that have taken place in this area within the cryptocurrency task force.
The document for organizing the entire cryptocurrency ecosystem is undergoing revisions and finalization.
Challenges in cryptocurrency mining continue
Meanwhile, in recent years, the mining process in Iran has significantly declined. With the facilities provided by the government for cryptocurrency mining, including reduced export electricity rates and the provision of energy other than electricity for the mining process, what has caused this decline in mining? Rezaei explained this issue: The decline in mining has not yet been resolved with the current process and the resolution we issued; we are still in the phase of addressing the problems in this sector. He pointed to the serious issue of energy imbalance in the country, stating: One of the significant factors currently hindering the mining process is the energy imbalance in the country. This issue has become so critical that we had to cut industrial electricity supplies for some industries, and last year, household electricity was cut in several regions at times. Therefore, part of the reason for the decline in mining relates to this issue; another part is linked to the policy adopted at the end of the previous government’s term. The policy for cryptocurrency mining was implemented from 2019 to 2021; however, in the last eight months of the previous government, almost the entire mining process was banned by a resolution from the Supreme National Security Council, effectively halting the whole mining industry. This cessation caused many devices to stop operating and many investors to withdraw from this field, and the impact and consequences of this decision remain to this day; indeed, there is still a lack of trust regarding this industry. Although the Thirteenth Government has updated the mining regulations, they have yet to be implemented. For instance, the regulation stipulates that mining should receive a 30% to 35% discount on energy carrier prices; however, none of the mechanisms have been implemented yet, and there is no framework. He discussed the reasons for the delay in enforcing this resolution: Part of it is with the Central Bank, and part lies with the Ministry of Economy, which ultimately has not been accomplished. After extensive follow-ups in the National Cryptocurrency Task Force, the Central Bank stated that the regulation is general. We only have the import aspect concerning currency obligations; ultimately, this resolution has yet to yield results. In subsequent task force meetings, it was decided that the regulation should be revised again to eliminate any legal loopholes. One of the reasons for modifying this regulation is precisely that. Moreover, despite the new regulation being established, it has not yet been implemented, and we are actively pursuing its execution. One of the responsibilities of the task force is this follow-up.
One of the serious factors hindering the mining process is the energy imbalance in the country.
Obstacles from Opposing Entities in Implementing Regulations and Orders
These statements indicate that there is no disagreement within the cryptocurrency task force regarding the advantages of cryptocurrency mining, and the task force believes that cryptocurrencies can generate revenue through the mining process. The only issue is that various institutions must be aligned with this perspective. Rezaei explained this by saying: “The cryptocurrency task force includes a secretariat, of which I am responsible, and we fully support cryptocurrency mining. However, some entities that are task force members and attend meetings oppose this view. Therefore, one of the tasks of the task force is to make sound decisions, supported by reasoning, logic, and expert opinions, that are in the country’s best interest. The current decision is that mining should grow and this sector should expand, although opposing entities are creating obstacles in implementing the regulations and orders.” When asked which entities most oppose cryptocurrency activities, he replied: “There are disagreements on every issue, and this opposition varies by topic; some entities believe that the country’s interests lie in not allowing mining because it increases trade. For example, the Ministry of Economy supports mining, but when it comes to token issuance, they delay; the Central Bank agrees with mining for imports but falls short in providing mechanisms and conditions for using cryptocurrencies for imports. Therefore, it cannot be precisely stated which entities are opposed to or in favor of cryptocurrency activities, as this issue has many dimensions. Some agree with the principle but disagree with the methods; these developments have caused delays overall. Our effort in the task force is to gather alignments and consensus.”
The Pros and Cons of Using Cryptocurrencies to Circumvent Sanctions
Regarding whether cryptocurrencies, given their decentralized nature, can be used to circumvent sanctions—as American officials have pointed out—and how much we have utilized this capacity for trade or plan to use it for exports or imports, Rezaei responded: “Based on the statistics obtained from monitoring and control, and analyses by companies like Ciphertrace, Chainalysis, and Crystal Blockchain, it seems that there is no possibility of circumventing sanctions when using cryptocurrencies for large amounts. However, it may be feasible in small-scale trade and everyday transactions by individuals or merchants. Indeed, there are currently some traders using cryptocurrencies informally. However, legalizing this process and creating legal infrastructures for it have reached a government conclusion that would benefit our trade. Another reason for amending the cryptocurrency mining regulation was to enable the use of cryptocurrencies for imports. This issue has been examined, and the government and all entities have concluded that it is possible and that such capacity exists. But how have we utilized it? Currently, the capacity to declare officially and publicly is very limited. Although in informal mechanisms and security institutions, information or even economic entities can circumvent sanctions at lower levels, which are already operational and being used. However, there is no precise data on trade with cryptocurrencies; for instance, there is no information on how many barrels of oil have been sold this way, even within the government. But this capacity exists and should be utilized, even though its use has not yet reached the extent it should.”
In using cryptocurrencies for large amounts, there is no possibility of circumventing sanctions; however, it may be useful in small-scale trade and everyday transactions by individuals or merchants.
On Taxation of Cryptocurrency Activities
Rezaei discussed the issue of taxing cryptocurrencies, the differing opinions in Parliament, and the cryptocurrency task force’s decisions on this matter: “One of the clauses in the ecosystem regulation document is taxation. In the country, there is a perspective that taxation should be viewed as a tool for control. At the same time, pricing and taxation should not lead to the emergence of a black market or the expansion of the informal market. Therefore, we must close the avenues for creating an informal market and then proceed with taxation.
It is important to note that cryptocurrencies inherently possess a decentralized and regulatory-evading nature. Although domestic platforms have managed to control this issue to some extent, and some of the activities and transactions conducted by Iranian citizens take place on domestic platforms, there is also a concern that taxing cryptocurrency gains could drive users away from domestic platforms. Ultimately, this would harm the domestic platforms and lead to transferring cryptocurrencies and people’s investments to foreign platforms. In this regard, we should look at countries with more lenient regulations for cryptocurrencies, such as the UAE, which not only does not tax capital gains from cryptocurrencies but has also facilitated the presence of companies for blockchain activities. “When asked whether, under such circumstances, people’s investments in cryptocurrencies are fleeing Iran, he replied: “The reality is that we share the same perspective. However, in decision-making, global experiences have shown that countries blocking underground avenues still maintain heavy tax policies in some cases; for example, the United States charges up to 30% tax in certain instances, while some sectors are tax-exempt or have tax incentives. He was also asked about the extent to which monitoring cryptocurrency activities and preventing them from going underground is feasible in the country. He stated: “This can be monitored and controlled empirically and scientifically, and we can limit the underground market by implementing certain policies. Of course, it is impossible to eliminate it; however, limiting the underground market by over 90% has been successfully experienced in advanced countries like the U.S. and Europe, which monitor cryptocurrency activities and impose heavy fines and taxes. Therefore, this is operationally feasible. However, when we will be able to implement this, what our objectives are from this action, and whether we will achieve our goals are details that have yet to be concluded and require consensus.
When asked whether the national cryptocurrency task force and Parliament are aligned regarding the taxation proposal or if there are differing opinions between them, he said: “There are differing opinions among all entities, and within Parliament itself, there is no consensus among all representatives, or at least among those following this issue. Therefore, there is also no agreement on this matter in Parliament. One of the most significant challenges facing the country today is the lack of consensus in this area; this disagreement often leads to stagnation and prevents entities from reaching an understanding and agreement.”
One of the most significant challenges facing the country today is the lack of consensus in the cryptocurrency sector, which causes stagnation and prevents entities from reaching understanding and agreement.
The Status of the Cryptocurrency Task Force Is Still Not Strong Enough
Amid all the decisions made by the National Cryptocurrency Task Force, dissenting voices from parliamentary representatives regarding the cryptocurrency sector occasionally emerge. Rezaei explained whether the task force can serve as a final authority on national cryptocurrency decisions or if other entities might still make decisions without the task force’s input: “Currently, the task force does not possess a strong legal status or authority to act as a final arbiter. Other entities also have legal powers and can propose drafts and bills that come to the government. Therefore, there needs to be consensus within the government body. The law and its regulations must be approved so that any proposal in the cryptocurrency sector is examined and finally approved by the National Task Force. Only then can we say that the task force is the final authority. However, from a legal and regulatory standpoint, the task force does not hold such a position. Due to the coordination that has taken place, the government body has almost reached a consensus that anything to be approved in the cryptocurrency sector must first be reviewed by the task force. This is evident in cases where entities have sent proposals to the Cabinet, which then referred them to the National Task Force; that is, ministers or deputy ministers ultimately had to advance the matter through the task force. However, whether this trend will continue and whether this structure is solid is uncertain until a robust law or regulation is in place. The regulation must stipulate that the Cabinet approves the formation of a task force, and anything to be approved in the cryptocurrency sector by the government must pass through this task force. Until we have such a regulation, we cannot say with certainty that the task force is the final authority.” When asked whether any efforts have been made over the past months, since the task force began operating, to reach such a status, he stated: “Yes, efforts have been made, but decisions need to be made by high-ranking government officials, including the esteemed president, the first vice president, and the former economic vice president, Dr. Rezaei, which have taken some time.”
Efforts to Formalize the Task Force’s Activities
On the other hand, aside from the decisions made amid disagreements within the government that are examined with ministerial consensus in the task force, some decisions are made by other entities, including the Islamic Consultative Assembly or judicial bodies. When asked whether the decisions of the representatives in parliamentary committees are also made in consultation with members of the National Cryptocurrency Task Force, Rezaei responded: “Our approach has been that the National Cryptocurrency Task Force, as its name implies, should be genuinely national; that is, it should include all governing powers, such as the General Staff of the Armed Forces, the Law Enforcement Force, which are outside the government body, the three branches of government, the prosecutor’s office, the judiciary, the legislative branch, the Islamic Consultative Assembly, and the economic committee, with representatives from all participating and providing input. Currently, representatives from these entities are present in the meetings; for example, Mr. Tavangar or Mr. Pourebrahimi participate in the sessions. The unwritten decision of the country has been to establish this task force so that all decisions regarding the cryptocurrency sector are made in one place. However, the core issue now revolves around the legal recognition or establishment of a legal structure for this task force. Until this is accomplished, these agreements remain verbal and on paper, lacking a solid legal foundation. Suppose the current parliament changes and the representatives supporting cryptocurrency activities change their views and decide to approve something at their discretion. In that case, no one can stop them. However, if the task force’s activities become legal, such occurrences would not happen. One of the main challenges the task force currently faces, which we are trying to resolve, is not easy.”
Another recent development is that the Law Enforcement Force and Cyber Police decided to set a monetary cap on the withdrawal of assets from exchanges. Such decisions, made without expert consultation, can create turmoil among users and discourage individuals who wish to generate income. When asked what the task force plans to do to prevent confusion among opinions, Rezaei explained: “Any decision made must fall under the legal and regulatory duties of the Law Enforcement Force. We need to determine whether current laws and regulations allow for this. For example, certain legal powers have been granted to the Central Bank and various ministries. When we say that the legal status of the task force needs to be approved and established, it is to limit the powers of the entities and bring them under the decisions of the task force to prevent confusion. Currently, the activities of these entities can be considered parallel work. While all decisions should be consolidated, the regulations determined by the task force should be the final authority. Until this happens, we will continue to witness these disagreements.”
The legal status of the National Cryptocurrency Task Force must be approved and established to limit the powers of other entities and bring them under the decisions of the task force to prevent confusion.
When Entities Do Not Want Their Authority Limited
However, with the rapid development of technology, delays on this issue waste time and cause the opportunities for decision-making to diminish. Regarding when the final decision on the operations of the Cryptocurrency Task Force is expected to be made, Rezaei explained: “Sometimes, the reason for the delay is ignorance; however, at other times, the delay arises because entities do not want their authority to be limited; therefore, they refuse to accept this decision, and this is where the work becomes difficult. One of the reasons this issue is constantly postponed is due to this problem and conflicting interests. We hope that the government and the governing body become aware that this is necessary for the country. The thirteenth government genuinely has such a perspective and program, established in the government’s transformation document. Whether all the clauses of the transformation document will be executed, whether the government plans to implement all the clauses or prioritize them are issues that will become evident in practice.”
Examining the Barriers to Launching the Crypto Rial
Another topic that has recently caused a stir in the government and parliament is the Central Bank’s Crypto Rial. On the one hand, the Central Bank insists on launching its digital currency; on the other hand, representatives in the Parliament’s Article 90 Commission have opposed this issue, while the Knowledge-Based and Digital Economy Committee insists that there are no legal prohibitions against launching the digital rial, resulting in many differing opinions. The question arises whether there is even a need to launch a central bank digital currency in the country, as has been done in other countries. If launching this digital currency is necessary, what should its technical aspects be, and is the responsibility for this fundamentally within the Central Bank? These are some of the questions raised. Rezaei explained the ambiguities surrounding this issue and the decisions made by the task force: “This matter has been discussed in the Cryptocurrency Task Force, and there were also proposals. The Central Bank was supposed to present the plan approved for the Crypto Rial in the Supreme Monetary Council to the task force. However, the issue is that the same disagreement exists here as well; for example, the parliament believes that the issuance and design of the Crypto Rial require changes to the monetary and banking laws of the country, thus preventing this action. Some of these points are correct; we need our monetary law to be amended, and the existence of the Crypto Rial should be defined as one of the forms of domestic currency. Aside from the disagreements that we may have regarding its design, there are also several legal and regulatory weaknesses. In fact, one of the discussions in the task force has been about how to resolve these issues. Some of these matters can take a lot of time. Just as the country’s banking law and the structure of the Central Bank have been under review for nearly two decades and still have not reached a conclusion, if we want to change the monetary law, a similar scenario could arise and consume a significant amount of time. Therefore, in practice, the lack of law, legal weaknesses, or the unwillingness of representatives to cooperate creates problems, and all of this slows down operations in this field.” He also noted: “Another reason for these events is that the importance of cryptocurrencies in the country has not been recognized; on the other hand, there is a common misconception in our country that until an issue turns into a crisis and threat, entities do not sit around a table to collaboratively resolve the matter while setting aside their differences; however, when an issue becomes a crisis, they eventually decide on it. The indecision regarding whether or not to have a Crypto Rial partly stems from the question of what benefit there is in having or not having a Crypto Rial? Does it even matter? While this perspective is incorrect. One of the points we emphasize in the task force is exactly this. The task force’s role is to make decisions, create momentum, and formulate major policies. This role should have been legally assigned to the task force but has not yet been approved. Despite being empty-handed, the task force has tried to achieve consensus. Until now, we have succeeded in some areas but have not reached agreement in others. Some external reasons prevent our plans from concluding or slow them down.”
Our country’s common misunderstanding is that until an issue turns into a crisis and threat, entities do not sit around a table to resolve the matter while setting aside their differences collaboratively.
Why the Cryptocurrency Task Force Is Quietly Active
Despite these statements, since the establishment of the Cryptocurrency Task Force, it has been rare to hear its name mentioned as a decision-making body. Rezaei explained the reason for this by saying: “Meetings have been held regularly; however, due to certain considerations, media work in this area has not been much and has not been communicated. Given the political and economic currents in the country, it has been deemed better for work to be done first rather than to engage in media propaganda to generate momentum.” When asked how task force members are selected and how many meetings have been held so far, he responded: “In the country, about 22 entities are related to cryptocurrencies. The task force consists of 18 fixed entities, and some entities are sent copies to invite them to participate, and they are invited as observers to various meetings. For example, the Research Center of the Parliament, the Tax Administration, and the Center for E-Commerce Development are invited to some task force meetings. To date, we have held over 65 meetings across three layers, similar to the government’s economic commission, which has main, secondary, and specialized meetings. Nearly 25 meetings have been held at the main level; however, not all 25 meetings were named under the National Cryptocurrency Task Force; 10 meetings were held under the National Cryptocurrency Task Force because, before the issuance of the transformation document, the president had tasked the Economic Vice Presidency with cryptocurrencies. Dr. Rezaei also conducted meetings related to cryptocurrency organizations under government coordination meetings, and the relevant decrees were formulated during those meetings. About ten meetings of specialized commissions have been held, and the specialized meetings related to cryptocurrencies in the entities have been around 30, making a total of over 65 meetings held.”
