With the latest amendment to the legislation, Iran has become the first country to use cryptocurrencies at a state level for import funding.
The Iranian Cabinet amended legislation to redirect digital currencies into the funding mechanism of the Central Bank of Iran (CBI) for imports, as per the report by the official The Islamic Republic News Agency (IRNA). The report by the CBI and the Ministry of Energy said,
“The miners are supposed to supply the original cryptocurrency directly and within the authorized limit to the channels introduced by the CBI.”
The limit on crypto for every miner will be decided by the level of the subsidized energy used for mining and the Ministry of Energy’s instructions.
This could create a war of hash rate in the Bitcoin space as China continues to lose its share while Kazakhstan, Iran, Malaysia, and Canada record an increase, as per Cbeci.org.
Iran’s share particularly has increased by over 2% in April 2020 from 1.74% in Sept. 2019.
Iran’s cryptocurrency move isn’t new and is a necessity for a country that is strapped for international currencies. In August 2019, it officially legalized crypto mining but banned trading in an attempt to take advantage of its subsidized electricity and extract taxes.
Iran’s fiat currency, the Iranian Rial, has also fallen as the country struggles with inflation, currently at 34%, for the past three years. Its economy has also been contracting since last year; this year, it did -10% a quarter. About a year back, Brian Hook, the US Special Representative for Iran had noted that,
“The regime is struggling to acquire the foreign currency they need to procure imports such as machinery, industrial inputs, and consumer goods.”
Earlier this year, the nation allowed power plants to operate large scale Bitcoin mining operations.
Given that Iran is also in the grip of US sanctions, it is bypassing the dollar and officially using Bitcoin. The country is also considering creating its own digital currency.