Iranian authorities have banned all currency exchanges and financial institutions from using bitcoin and other digital currencies, according to the central bank’s circular issued on Sunday. Matthew J. Martin, founder and CEO of Blossom Finance, has given his take on the reasons for the regulation and more in his written comments to Sputnik.
It seems that despite cryptocurrencies having been used to help Iranians avoid US-imposed economic limitations, the authorities of the Islamic Republic first voiced the decision in December and then formerly introduced a ban. The reason lies in the severe weakening of the Iranian rial, which coincided in time with the new cryptocurrency regulation.
“It seems obvious that this ban is to avoid the continued capital flight by Iranian citizens trying to protect their wealth from inflation.”
He went on to say that “[protecting] against money laundering,” as Iranian authorities have outlined their goal, in this case virtually means “preventing citizens from exchanging their money at a fair market rate.”
“Shariah is concerned with preservation of wealth and it’s unfortunate when a government enacts rules and monetary policy that have the opposite effect,” Martin added.
Responding to the question whether Tehran’s attempt to exert control on the country’s currency market after rial’a all-time low will affect the currency’s devaluation, Martin noted that according to history, currency controls fail as time passes.
Earlier, Iran announced that it was on a path of designing its own virtual currency to rebuff challenges set by other countries in the field. Martin noted that an overall ban on other cryptocurrencies means that the choice would be limited, and people would be forced to pick what they consider the “best cryptocurrency” based not on its merits, as it is supposed to be, but rather on a draconian law.
“It’s yet to be seen what benefits – if any – a distinct, government-backed cryptocurrency would have. Why reinvent the wheel?” he remarked.
The views of the speaker do not necessarily reflect Sputnik’s position.