Tehran, Iran – Iranian authorities have once again intensified their crackdown on cryptocurrencies and online exchanges as the value of the national currency, the rial, continues to plummet in an economy fraught with turmoil.
Last month, the Central Bank of Iran (CBI) abruptly halted rial payments on all cryptocurrency exchanges, leaving over 10 million crypto users unable to purchase Bitcoin and other global digital currencies with rials. The move was aimed at curbing further depreciation of the struggling national currency by preventing it from being exchanged for foreign currencies.
The cryptocurrency market saw significant growth last year and is expected to remain bullish through 2025, as countless young Iranians turn to the global market to generate income in an economy largely isolated under stringent Western sanctions.
This approach has been attempted before, albeit on a smaller scale and for shorter durations. However, the current measures appear to be part of a broader governance effort by an establishment seeking stringent control and oversight over the rapidly expanding crypto community.
Iran’s economy has been grappling with inflation rates exceeding 40 percent for years and remains disconnected from the global payments system.
CBI Asserts Authority
Following the imposition of restrictions, the central bank largely remained silent, offering no clarifications to the public. The CBI also did not respond to Al Jazeera’s request for comment.
In a public statement, the CBI noted that its governor, Mohammad Reza Farzin, participated in a meeting with the heads of government, judiciary, and parliament last month, during which the bank was granted “full authority to monitor and manage the cryptocurrency market.”
President Masoud Pezeshkian reinforced this authority in a letter to Farzin, published in the media, emphasizing that the CBI is the “sole trustee” to manage the crypto market. The meeting also concluded that the government aims to increase export trade involving cryptocurrencies but provided no details on how this would be achieved.
These new restrictions are part of broader measures to prevent currency depreciation, as the CBI injects more foreign currency into the volatile local market. Police have also announced periodic arrests of illegal currency traders in Tehran and other major cities.
The Iranian rial hit a new all-time low this week, exceeding 940,000 rials per US dollar. In October last year, a dollar was valued at less than 600,000 rials, and in early 2018, it was less than 40,000 rials. The national currency has faced sharp declines in recent weeks due to escalating regional conflicts, setbacks for the Tehran-led “axis of resistance,” and Donald Trump’s “maximum pressure” campaign.
A 4 Percent Cap for USDT?
Days after banning rial purchases of cryptocurrencies, the CBI imposed conditions on online exchanges and began negotiations with them. Many smaller exchanges were forced to comply with some conditions, such as providing proof of reserves. Some exchanges have had their rial gateways restored with limited capacity, while others are still negotiating.
According to documents reviewed by Al Jazeera, the CBI’s proposed measures include high-level access to customer information, such as real-time updates and the ability to block users when deemed necessary. Similar to artificial limits on Iran’s stock markets, the CBI plans to impose daily caps on how much the rial price of cryptocurrencies can fluctuate. If currencies move beyond these limits, their rial trade would be temporarily suspended.
The central bank is particularly focused on the dollar-pegged stablecoin Tether (USDT), which many Iranians have been buying as a hedge. The CBI aims to ensure that if USDT prices surge by more than 4 percent in a day, Iranian traders would be temporarily blocked from purchasing it.
‘Rationality Not on the Agenda’
The sudden block on rial gateways forced some crypto exchanges to seek temporary alternatives, such as using different bank accounts to facilitate rial payments. While incoming and outgoing crypto transactions were unaffected, users could still withdraw rials from their accounts if desired.
The CBI has faced criticism for its actions, with Economy Minister Abdolnaser Hemmati, a former central bank chief and presidential candidate, now targeted for impeachment by hardline lawmakers. The government claims the impeachment effort is politically motivated, as lawmakers seek to remove Hemmati just months into his tenure.
A local exchange director criticized the CBI’s strategy, stating that
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