Iran adopts Bitcoin for international trade amid heavy sanctions, falling rise, rising inflation

The Iranian government has adopted bitcoin for international trade as the country’s economic crisis worsens, with the increase in Covid-19 cases, the depreciation of the rial and the intensification of sanctions imposed by the US government.

Iran’s economic woes amplified

Iran is experiencing a severe economic crisis as Covid-19 cases increase in the country. The Iranian health ministry says the number of daily Covid-19 infections has more than quadrupled in less than two months. In addition, an increasing number of sanctions have been imposed on Iran by the US government as the local fiat currency, the rial, continues to decline dramatically.

Steve H. Hanke, a professor of applied economics at Johns Hopkins University and an expert on hyperinflation, described the situation in Iran as “a classic death spiral.” Wednesday explained:

Since 1/120, the rial has depreciated by 54.23% against the USD in the free market and inflation has risen from 21.89% per year to 158.31% per year according to my measure.

Bitcoin: a solution to Iran’s problems

While Iran has long been pro-bitcoin, having regulated the cryptocurrency industry since August 2019, the country made a major move last week to take cryptocurrency adoption to the next level. The IRNA publication reported that the Iranian cabinet has changed cryptocurrency legislation based on a joint proposal by the CBI and the Iranian Ministry of Energy to allow the central bank to use cryptocurrency to pay for imports. This could also help the central bank evade restrictions imposed by the US government.

While the government is still working out the details on how this will be done, the publication reported that licensed bitcoin miners in the country will have to sell their coins directly to the central bank. Iran Daily described:

The Iranian government has changed its regulations on cryptocurrencies to allow them to be used exclusively to finance imports at a time of increased pressure on the country’s normal use of hard currencies.

“Under the laws, cryptocurrencies legally mined in Iran will only be tradable when used to finance imports from other countries,” the news continued. “Miners should supply the original cryptocurrency directly and within the authorized limit to the channels introduced by the CBI.” Furthermore, “the legal limit for the amount of cryptocurrency per miner would be determined by the level of subsidized energy used for mining and based on the instructions published by the Ministry of Energy.”

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