Is Iran going through a crypto revolution?

Iran’s politics has many layers, but you know things are serious when someone invokes the authority of the country’s supreme leader, Ayatollah Ali Khamenei. This week, as the cryptocurrency conference RamzAti was convened in Tehran, a top official did just that.

Mohammadreza Poorebrahimi, a University of Tehran professor who heads the economic committee of a supervisory body, said Mr Khamenei’s command was needed for cryptocurrencies to “enter the country’s economy”.

It was a curious formulation as such currencies are already a part of Iran’s economy. Close to five million Iranians now trade in them using more than 100 locally based exchanges. In addition to cryptocurrency, they also trade in gold. The Iranian rial has long been unstable, falling further in value against the US dollar as sanctions continue to ravage the national economy and instability threatens the country. At the time of writing, $1 was trading for the record amount of 1.25 million rials.

Given this, it’s not surprising that Iranians resort to gold or cryptocurrencies. While the latter can be even more unstable, they provide potential for growth. There are also stablecoins such as Tether, which is pegged to the dollar and can become an alternative mode of exchange for those loath to use the rial.

The prominence of RamzAti itself shows how central the cryptocurrency conversation has become in Iran. The meeting was attended by many high officials, such as Mohammad Reza Farzin, the Central Bank governor who had previously expressed scepticism about cryptocurrencies, the head of the Tehran stock market and a number of top MPs.

Iranian officials have realised that they can no longer simply ignore cryptocurrencies and that they must act swiftly to govern them. Mr Poorebrahimi, a former MP, recalled an incident in 2017 when the then-central bank governor told a parliamentary session that the bank “didn’t agree” with cryptocurrencies and called on people to not use them. That approach clearly hasn’t worked, Mr Poorebrahimi added.

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Key organs of the state have since taken a very different attitude.

Mehdi Toghyani, vice-chair of the Parliament’s economic committee, spoke at the conference. He warned that if the cryptocurrencies trade went underground, this would threaten the rial and thus adequate laws and policies had to be put in place. He also said exchanges selling gold online could help stimulate the economy but only if this is within a regulatory framework.

The Parliament has been trying to set the scene. This past week, it passed the Development and Overcoming Obstacles Facing the Digital Economy Act.