Smart contracts are anticipated to become more prevalent in international trade as nations like Iran look to circumvent sanctions-related constraints.
In an effort to find alternatives to the US dollar and the global financial system, Iran has started using cryptocurrencies to settle cross-border trade transactions.
The first official import order using cryptocurrencies, according to the chairman of the Iran Trade Promotion Organization (ITPO), Ali Reza Peymanpak, who is also the deputy minister of industry, mine, and trade, was placed "this week." Peymanpak did not specify what goods or services were exchanged or with whom, but he said the deal was worth $10 million.
Smart contracts are anticipated to become more prevalent in international trade as nations like Iran look to circumvent sanctions-related constraints. Given that Iran and Russia have been collaborating more closely recently to lessen the dependency on the US dollar for bilateral commerce and have also suggested launching a new settlement system utilising their respective currencies, this is noteworthy. They will have a continuous business model up until that point thanks to cryptocurrencies.
Iran's cryptocurrency regulations
Iran's government enacted a ban on cryptocurrency trading inside the nation at the beginning of 2019. This had more to do with the proliferation of thousands of crypto-mining operations in Iran, which had a significant negative influence on the country's power supply. For a cryptocurrency that employs the proof-of-work (PoW) algorithm, mining is a competitive process that verifies and adds new transactions to the blockchain. A sum of money or transaction fees may be awarded to the winning miner in the competition.
In the modern world, a miner would ideally want devices with numerous top-tier GPUs. Electricity is used extensively throughout this operation. As a result, widespread power outages were caused by the country's growing mining population. The seizure of nearly 10,000 illegal cryptocurrency mining devices over the course of the previous five months was just announced by Iranian authorities last week. Many of these devices were discovered in public spaces like schools and mosques, which frequently receive free or heavily discounted electricity.
But the use of cryptocurrencies like Bitcoin and Ethereum is still permitted in Iran. This has more to do with the usage of expensive cryptocurrency for exports and cross-border trade. Iran revised its law in October 2020 to permit the use of cryptocurrencies to pay for imports. The government agencies believed that doing this would enable them to get over limits put in place as a result of American sanctions. However, this use was only allowed to pay for imports into Iran.
The hundreds of Iranian miners will be the source of the cryptocurrency. Iran introduces a licence scheme for bitcoin miners in 2019. It demands registration, the payment of a minimal power surcharge, and the selling of all bitcoins mined to Iran's central bank. It is important to remember that Iran is home to 4.5% of the world's Bitcoin mining operations, according to blockchain data firm Elliptic.
Ali Reza Peymanpak, the chairman of the Iran Trade Promotion Organization (ITPO), spoke to Iranian media earlier this year on the usage of cryptocurrencies for international trade. According to Peymanpak, "These cryptocurrencies and blockchain technologies have numerous practical discussions in commercial concerns." We will lose a significant portion of commercial prospects if we ignore it. He continued, "The use of cryptocurrencies is popular in our core markets, such as Russia, China, India, and Southeast Asia."
What cryptocurrency trading methods is Iran using?
The announcement by Iran's deputy trade minister about using cryptocurrencies for bilateral trade was seen as a signal from Tehran that it had found a way to get around international sanctions that had previously prevented it from using SWIFT, the largest bank transfer system in the world, and had for decades made it difficult for Iran to import weapons and foreign technologies. Iran has long been looking for transactions that are anonymous in nature, untraceable, and do not fall under the attention of international authorities due to the sanctions placed by the USA over Iran's claimed nuclear projects.
Cryptocurrency transactions are still the fastest way to conduct a secure and untraceable transaction, despite the fact that sceptics believe they may not be completely anonymous with regard to the two people involved. This is due to the fact that although bitcoin trades are recorded on a blockchain, which is often open to the public, they are not always associated with a person, giving users a small amount of anonymity.
As a result of its invasion of Ukraine, Russia is currently struggling to keep its trade links with the EU, the USA, and other nations intact. As a result, Russia, which has long been a pioneer in the area of cryptocurrency mining, is now a key player in leveraging the technology to circumvent trade obstacles. According to sources, this method may also be used for bilateral trade between Iran and Russia.
How many respectable companies and nations would want to take the chance of doing business with Iran and then being exposed to the possibility of being subject to their own sanctions? is a related topic. And other than to irritate the United States, why would Iran wish to make this public? Large arms sales like the purchase of ships or planes, aside from Kalashnikovs or other small weaponry, have not yet been conducted via cryptocurrency-based transactions. Iran just has a few options, then.
