Iran recently made its first Bitcoin and cryptocurrency payment to settle its imports while circumventing the embargo. This is the first such transaction publicly assumed by the country. According to Alireza Paymen Pak, Iran’s deputy minister of industry and trade, the goal is to make the practice widespread as early as next month.
Bitcoin and Iran, a successful first crypto attempt
While it is not known what cryptocurrency was used in the transaction and where the funds went, the amount of the transaction is well known. According to Alireza Paymen Pak, it was the equivalent of 10 million U.S. dollars that was transferred abroad to settle an import order.
The Iranian official does not hide the intentions of his country. In a publication on twitter, he says that by the end of September, the use of cryptocurrencies will be at the heart of foreign trade.
“This week, the first import order worth $10 million was successfully placed using cryptocurrency. By the end of September, the use of cryptocurrencies and smart contracts will be widespread in foreign trade with some key countries.”
A way to bypass international sanctions?
While other countries, such as El Salvador and the Central African Republic, have made bitcoin a legal tender in order to attract innovative companies and tourists whose activity could boost their economies, Iran’s interest lies elsewhere.
The Islamic Republic is not, without a shadow of a doubt, a preferred destination for crypto flagships. Moreover, by resorting to international crypto transactions, Iran finds a more efficient way to circumvent the sanctions that have been weighing on its economy for several years.
Since the Iranian revolution in 1979, the Islamic Republic has faced U.S. sanctions. According to a document published by the IRIS (Institute for International and Strategic Relations), the economic restrictions imposed on the country increased in 2006 following the resumption of uranium enrichment activities.
As the graph below shows, the Iranian economy is seriously affected by the economic sanctions. The country is totally disconnected from the international financial system.
Its exports of oil and goods have almost come to a halt, which has a negative impact on the balance of trade and the evolution of GDP. Moreover, the Islamic Republic is counting on the use of cryptocurrencies to try to reverse this trend.
Bitcoin (BTC) the Iranian ally that undermines petrodollar hegemony
Since the end of World War II, the U.S. dollar has been used as the reference currency for international transactions. This position places Uncle Sam’s country at the heart of the world economy. Each country is obliged to have a reserve in USD to access essential products such as oil or simply to settle its international transactions.
This state of affairs gives the United States significant power and it does not hesitate to abuse it. Indeed, the US administration can freeze the reserves of a sovereign country whenever it wants.
Last March, Russia declared more than $300 billion in foreign exchange reserves frozen following the country’s offensive in eastern Ukraine. In the aftermath, several Russian banks were disconnected from SWIFT by the European Union and NATO.
The freezing of its assets abroad has pushed Moscow to consider the use of cryptocurrencies.
On May 27, Ivan Chebeskov, head of the Financial Policy Department of the Russian Ministry of Finance, said that “the idea of using digital currencies in transactions for international settlements is being actively discussed”.
Unsurprisingly, we could see Russia following Iran’s lead. The decentralized nature of bitcoin gives countries targeted by economic sanctions the ability to send money anywhere in the world without fear of potential confiscation. Thus, the more states adopt bitcoin, the more an independent and censorship-resistant international financial system takes shape.
Since 2017 I am fascinated by bitcoin that I no longer hesitate to popularize by organizing meetups/conferences or by sharing its news through this article you are reading.