The Central Bank of the Islamic Republic of Iran is legally responsible for managing the country’s monetary affairs. Typically, the most important duties of central banks include issuing national currency, overseeing the banking and payment network, formulating monetary policy, and managing currency conversion and reserves. However, in Iran, the central bank and its subsidiaries have become extensively involved in executive functions in various financial and monetary sectors. At the same time, they have not been particularly successful in their supervisory duties related to banking and ensuring monetary and currency stability. In reality, rather than serving as the brain and nervous system of the country’s monetary and banking system, the central bank has, through excessive executive interventions and the establishment and expansion of subsidiary companies, transformed itself into a large operational body, not merely a policymaker and regulator.
Despite this, the central bank’s interventionism and bureaucratic expansion are not limited to the realm of the rial, foreign exchange, and banking. It has also taken interventionist and damaging actions in unrelated areas such as crypto assets. This article examines the ideological and operational roots of these missteps.
Table of Contents
Mistake 1: The Central Bank’s Definition of Cryptocurrencies
The desire to control everything possible and impossible is not limited to matters related to the rial, foreign exchange, and banking. By law, the central bank is responsible only for cryptocurrencies. The law also clearly defines cryptocurrency: money is a means of payment, and managing payment tools—whether digital, centralized, decentralized, paper-based, or metallic—falls under the central bank’s jurisdiction. The central bank, by law, can issue an encrypted digital currency, recognize another digital asset as money, or define new currency units in cooperation with other countries. However, apart from what is legally considered money—meaning apart from payment instruments—other types of crypto assets, including their issuance, mining, trading, storage, and applications, are entirely unrelated to the central bank. The text of the law, the detailed correspondence between the Islamic Consultative Assembly (Parliament) and the Guardian Council during the approval process of the new Central Bank Law, as well as the detailed discussions of the parliamentary specialized commission and the official interpretation of June 30, 1403, make this point indisputable. The central bank must acknowledge this reality.
Mistake 2: Denying the Future
In the near future—within the next 5 to 10 years—dramatic changes will take place in the global economy. The nature of money, assets, transactions, guarantees, and collateral, as well as the entire monetary and financial system and all related tools and services, will undergo profound transformations due to the tokenized economy based on blockchain technology.
This historical transformation will create immense wealth, but it will also fundamentally challenge existing financial and monetary institutions. Web3 and the token economy are inevitable. Restricting crypto assets in Iran is like trying to stop the clock—breaking the clock won’t stop time. Instead of focusing on controlling or restricting crypto assets—an impossible task—dedicated professionals, experts, and managers in the central bank and other governmental institutions are advised to take an opportunity-driven approach toward these historical and global transformations. At the very least, they should look at neighboring countries such as the UAE and Turkey and prepare Iranian banks and financial institutions to benefit from Web3 advancements. It is unfortunate that Iranian banks have neither activities nor readiness for the future. The future cannot be denied, but it can either be wasted or embraced.
Mistake 3: Underestimating Users’ Enthusiasm
From the moment they emerged, cryptocurrencies and crypto assets were met with enthusiastic and passionate adoption by people who desired change. Without this enthusiasm and energy, not only would this industry have failed to take off, but it would have faded like many other short-lived trends. Many governments, particularly the U.S., have made significant efforts to destroy crypto assets, yet all have failed. The path that some Iranian policymakers want to take has already been tested and abandoned by the rest of the world. The success of Iranian crypto exchanges is due to user demand. Users trust these exchanges, and despite all obstacles, these platforms have managed to attract a portion of Iranian users’ assets. The enthusiasm of these users has fueled the success of these exchanges. If these companies are shut down, users’ enthusiasm—and their assets—will simply move underground or across borders.
Mistake 4: Failing to Understand the Requirements for Technological Development
Crypto exchanges are highly significant industrial entities because they integrate technology and capital, facilitating the development of financial technologies. They drive new services, financial technologies, continuous user satisfaction, market transparency, and overall economic health.
The enthusiasm, knowledge, and responsibility of these institutions, despite receiving no government investment, are exemplary across all Iranian industries. The restrictions and account closures imposed on them are the kind of measures that, if applied to any bank in the country, would lead to its collapse within days.
Mistake 5: Trying to Assume Unenforceable Responsibilities
The central bank lacks the legal, structural, operational, and technical capability to manage the development of crypto assets in Iran. In fact, no central bank in the world has such a claim or ability. Certain reports about the central bank drafting regulatory documents and policies expose a deep misunderstanding of its actual capabilities. Rumors of plans to ban tokenization in Iran, take custody of all digital assets, oversee which crypto assets are legal or illegal, and classify all global crypto assets as tradeable tokens suggest that those making such claims neither understand crypto assets nor have even a basic familiarity with Bitcoin’s philosophy. If these claims are true, they represent an attempt to impose unenforceable responsibilities. The effort to define and enforce such measures will undoubtedly be disastrous for those making these claims.
Mistake 6: Crypto Assets’ Impact on Exchange Rates
The exchange rate in Iran is primarily determined by liquidity growth. Unjust sanctions and political-security tensions exacerbate economic challenges, leading to increased liquidity, monetary base expansion, budget deficits, and government debt—resulting in the devaluation of the rial and rising exchange rates. This fundamental reality has been acknowledged repeatedly by the current Minister of Economy and even the Governor of the Central Bank. Additionally, research has long predicted future exchange rates based on past liquidity growth, proving that liquidity expansion is the primary driver of exchange rates. While occasional factors such as erratic supply and sanction-related trade disruptions can temporarily impact the exchange rate, the overall effect is limited. More importantly, the size of Iran’s crypto market is relatively small compared to the total foreign exchange market and trade volume, meaning its influence on exchange rates is minimal. Furthermore, crypto assets contribute significantly to Iran’s economy through mining, exports, cross-border transfers, and international service sales. If the inflow-to-outflow ratio isn’t positive, it is at worst, slightly negative. It is time to discard the myth that Tether or crypto assets dictate Iran’s exchange rate.
Everything stated here, and much more that could not be covered in this short article, is driven by a sincere desire for Iran’s development. Hopefully, all sectors of the country will work together to keep the doors of progress open, especially in these critical historical times. The development of crypto assets holds immense potential and countless benefits for the future of the Iranian people.
