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Iran to Launch State-Backed Cryptocurrency to Counter SWIFT and US Regulations (btcwires.com)
89 points by riya_876 19 days ago | hide | past | web | favorite | 47 comments

This article seems to be just speculations without any reliable source. Using cryptocurrencies for any meaningful amount of money is impractical for sanctioned countries because of difficulties in exchange with fiat currencies. Currently the Iran government forces very restrictive policies on cryptocurrency use by people. Even if there is a CBDC project under development, a small project done as an experiment does not show what a country is trying to do.

(I am CTO of a local cryptocurrency exchange market in Iran)

I can think of ways for them to essentially use crypto as a negotiable bond (high rates due to uncertainty about politics and stability, although Iran itself is a good long-term growth bet in ways other than politics). Issue the CBDC in a way which essentially promises appreciation, do cross-chain atomic swaps for other currencies for overseas purchasing.

Might not be more efficient than, say, shipping tankers full of oil to countries who don't do the sanctions, or other goods, but it's an option. I think if there were essentially a way to anonymously buy 30% interest rate Iranian bonds at a retail level for crypto, you'd see people do it. They could also go after the stablecoin market by earmarking oil/other commodities/physical USD/etc. as backing.

Iran can easily issue BTC- or ETH-denominated bonds.

Why would a free market buy bonds denominated in some newly created currency? Smells like the issuer just wants to be able to devalue this currency in order to pay the interest.

In the end, the reason reasonable investors won't buy 30% BTC-denominated Iranian govt. bonds is that Iran will have to exchange the ETH/BTC earned from selling the bond (because whoever Iran wants to pay don't accept ETH/BTC), which exposes the investment to a huge exchange rate risk.

> (I am CTO of a local cryptocurrency exchange market in Iran)

Is it still possible to trade there? I remember reading that some exchanges like Bittrex are going to block Iranian accounts because of new sanctions.

Almost all of major exchanges block Iranian users. There are risks, but you can use fake identities, VPNs and such techniques to bypass restrictions. The main problem is converting among cryptocurrencies and USD, but there are channels and people that supply stable coins using links with neighbor countries. In fact, USDT price in Iran is just about 5% higher than USD. Having USDT or by mining, you can easily trade all cryptocurrencies, especially in crypto-to-crypto exchanges.

Also local exchanges like out startup operate in Iran to match domestic supply and demand without the need of external entities. But anyways, this is all about not-so-large sums of money and not government level transactions.

this sounds like a textbook false flag "think of the children" action on public opinion.

enemy, or Grey zone neutral power, announce they will use something a state always wanted a reason to jump in but didn't really had a legal reason.

with this news, real or otherwise, every intelligence agencies will be allowed to monitor cryptocurrencies. and then "cooperate" with the irs or do whatever is their real intent.

I find it funny how some countries want to use crypto to avoid some regulations they don't like.

However they are not using existing cryptos: instead they try to bootstrap their own crypto to still milk the seignorage cow they like, and to keep the ability to rewrite the rules later that they also like.

My trust in these countries monetary policy is less than the trust I have in say Grin.

If Iran was serious, then they would use Ethereum or Bitcoin. They would make an exchange in their country to get local currency in/out Ethereum. The exchange could allow local banks to transfer in/out (ACH-like) to the exchange to get in/out between Ethereum and their local currency. Then all cross-border controls are gone by Ethereum senders and receivers crossing borders.

The only reason not to is:

1) They don't want local currency holders expropriating their capital

2) It could result in their local currency having high inflation or even possible collapse down the road

But... if cross-border flow was really their goal, then they would use Ethereum.

The only problem with this aproach is that the local exchange needs to do an initial purchase of Ethereum from foreign markets, which is a traceable transaction.

Once they’ve traced the original ETH all transactions flowing out of it can be blocked by the other exchanges.

Their options are to either use a privacy coin (Monero) or make the initial purchase underground and somehow hope it doesn’t get discovered.

Sound great, but it's an insanely steep wall to climb.

* Their main goal, and problem, is to exchange to & from other currencies. They'll be subject to their coin being a poison pill that causes any bank or exchange dealing with it to be sanctioned, risking their own access to SWIFT, etc. How will they attract miners when miners will face the same exchange difficulties?

* Trust will be minimal, since it not only starts out as just another shtcoin among thousands, but unless they are VERY transparent and do no pre-mining or take other excess rights/value available to coin-makers, who else would trust it? E.g., that Venezuelan coin, supposedly backed by oil barrels, has it done anything good?

Even if they do get people to trust it, and get ways to exchange it, they'll certainly be target of state-level cyber-attacks if the currency gains any traction, and either a massive corrupting hack or a 51% attack could be even more devastating than having never started in the first place.

I'm buying popcorn.

What are these things exactly (this and Venezuela's "petro")?

Tokens on the eth blockchain? Something else?

I’m pretty sure the Petro was just a centralized database that the Maduro administration controlled and called a blockchain. Not too dissimilar from their government..

> Venezuela's "petro"

By the way, why wouldn't sanctioned countries including Venezuela, Iran, Russia (all the three trading oil) and others find some countries willing to partner with them and establish a common cryptocurrency? Wouldn't this make more economic sense than every country inventing a crypto of their own?

Regarding Petro they supposedly launched on NEM about a year ago, but nobody can tell you the contract address. A lot of basics missing.

If there are zero trust atomic swaps to some more broadly used currency, and this one has privacy-protecting features, it would actually have a chance.

Sorry, but this is an absolute non-starter, it has zero chance. Nobody trusts Iran on anything "atomic" anymore, and even zero-trust isn't enough - we've been deep in negative territory for quite some time. This is just too radioactive.

I am a sanctions guy at a local financial institution. I only speak for myself.

I read through this and lack of any detail is telling ( not unlike with EU SPV and Venezuela's own crypto attempt ). Personally, I think that crypto will face the same fate as potcoin, but even when we assume it works, it will work well locally.

If there is one thing we learned by now, it is that the whole point of sanctions like these is to limit sanctioned country's access to the international markets. Few exchanges will touch it and if they do, they will likely be sanctioned.

So there is that, useful article to add to my linkedin feed.. but that is it..

edit: added missing 'they'

if you're an authority on the matter and consider the news pure noise, why share it anywhere?

Identifying noise is a valuable service for interested parties.

For a sanctioned country to create its own crypto currency makes little sense. The west will just ban any use of that currency and they will be in the same boat as before except now they will have a bunch of useless digital tokens. If they want to be able to move money and the potential to purchase goods and services with it, they should use an existing, established crypto.

Using something such as Monero/Zcash (pick your flavor of the month) makes far more sense as there is already a widespread supply allowing them to optimally 'wash' their funds. They will likely not be able to convert their crypto currencies into dollars and use those dollars in any meaningful way but they could use the crypto currency to purchase needed goods and services and allow the vendors to worry about fiat conversion.

Creating an Iranian cryptocurrency for use anywhere outside of Iran is doa. I don't really understand the point of using it inside Iran either as they have fiat for that.

> For a sanctioned country to create its own crypto currency makes little sense. The west will just ban any use of that currency

Crypto advocates often make a big deal out of the idea that states cannot in practice effectively prevent or regulate use of crypto currency.

This. You can't prevent the use of crypto because you can't attack any single point of failure.

I see the scenario playing out like this. Majority of nations declare the new Iranian crypto illegal, thus anyone mining it is guilty of sanction violations. They then crack down on all people mining it. They should be able to locate the majority of those computers relatively quickly. Most countries would quickly follow suit as they don't want the US to accuse them of sanction violations. Then the only people mining and maintaining the block chain reside in Iran. The new crypto currency is effectively dead at that point.

well sure because that's what crypto advocates are paid for. States can very easily take legal action against businesses that circumvent trade sanctions through crypto currency. And with businesses and institutional investors out of the window, it's uninteresting.

Honestly, Iranian banks have a better chance of wiring money abroad if they use Monero, but obviously it's not a solution the government will accept, because well, no control.

If they decide to fork any existing cryptocurrency or create some kind of token, it's likely to be banned on exchanges. I don't see how they could pull this off.

The big problem for any existing system is volume: Iran has enough money that they’d dominate the real currency exchanges and once that happens the risks go up for everyone involved. Even the most ideologically committed cryptocurrency proponents are going to think twice about going to jail on behalf of a foreign power without compensation.

A measured approach would allow for this growth in a way that doesn't spook the non-sanctioned markets.

Monero used to traded for around 45 cents ($0.45) for about 2 years, it trades for $45 right now, your argument would have worked A LOT better then. Why is Monero $45 right now? For the obligatory devil's advocate response who will you blame: dark net markets, sanctioned countries, better user experience? All we have are correlations and these networks are working as intended, and have gotten a lot more hardened and resilient. So let it trade for $4,500 just because Iran has some money to move.

The question is how much real money is entering or leaving the system, since that's what would matter here — if someone is trying to launder $1B it's probably going to be a big problem if the system is only exchanging $1M/day into stable currencies and the rest of the volume is speculation. Similarly, since there isn’t much base demand there simply might not be a sufficient volume of buyers on the other side of those transactions.

Then you get to the bigger problem: being involved in these activities has significant risks in any country which follows the sanctions. The authorities are going to want you to prove that you aren't involved in the illegal activity if you don't want to be charged with money laundering.

> The authorities are going to want you to prove that you aren't involved in the illegal activity if you don't want to be charged with money laundering.

The onus is on the government to determine an illicit origin for their charge of money laundering to stick. This is related to the US federal crime of Money Laundering, and not any other variation.

In the Monero system, receivers do not know the address of the sender. So, that's convenient.

US requires currency exchanges to make a strong identification for the customer in every transaction. Using Monero does not remove that requirement any more than using a suitcase of cash which just happened to show up in your office would.

That alone would be a federal crime and it almost certainly would be enough to get search warrants, etc. which would likely turn up evidence for other charges for anyone who is running an exchange while badly misinformed about the law. Anyone trying to be legit is going to steer clear of those hypothetical Iranian transactions, especially since the odds of being compromised in some other way are high even in the unlikely case that Monero can withstand a nation-state level adversary. For any significant volume – such as what we’re talking about – traffic analysis is going to get a lot of info and since it involves Iran you’d be betting that none of numerous highly-capable intelligence agencies have compromised another party who has a trace pointing at you.

Yes but this would be a DIFFERENT crime which I made it extremely clear we aren't talking about

Nation states aside, the point you seem to be missing is that many people people are able to acquire goods and services directly with Monero without using an exchange. Merchants are not subject to the regulations that national currency exchanges are subject to and there is no framework to create this kind of prohibition right now.

> Nation states aside, the point you seem to be missing is that many people people are able to acquire goods and services directly with Monero

Which is true for sufficiently small definitions of “many” but not what this thread was about. If you’re going to handwave about how being charged under financial reporting rules designed to prevent money laundering is a completely different crime then you have to acknowledge that there are reasons why a system which is adequate for a few people making occasional purchases will have big problems scaling up to the level of a nation laundering money to get around sanctions.

Wasn't Ripple/XRP designed for this exact purpose? Being a SWIFT replacement?

XRP doesn’t have any anonimity features, you can see who’s on the other end of the transaction and impose sanctions once they try to convert it back to fiat.

The US response should be interesting. Not sure how they could/would technically enforce sanctions.

Edit: Yes, I understand the banking tie in. I was thinking more of mining, and trading other cryptocurrency (monero maybe) for "bit-rials".

They’ll use the same techniques they are now: monitoring and blocking cash flows, getting partners not to use it, etc. This is the same way that drug dealers get caught even if they try using a variety of currencies, collectibles, real estate, etc. — at some point you need real currency to spend and the in/out-flows are monitored.

All a cryptocurrency adds is a public record making that task easier and the hokum used to sell it may make the NSA’s job easier if people believe it’s anonymous. Setting up a separate one also means there’s less benign traffic to hide behind.

Not all cryptocurrencies add public record. Examples: ZCash, Grin.

Via payment processors ... prevent people buying this currency / trading at exchanges that enable it?

Wouldn't people just mine the currency themselves and exchange it locally? As long as the currency's token is unique and scarce, people can use it to trade.

As long as the currency's token is unique and scarce and accepted as equivalent to cash by people that have goods to deliver. Many things are unique, scarce and entirely worthless.

If the purpose is to allow Iranians to circumvent restrictions on international trade, then you encounter the problem of not many people wanting to swap their goods or dollars for crypto-rial. (If the purpose is to allow people to make payments within the Iranian banking system in accordance with Iranian law, the crypto layer is redundant)

Ask what incentive those people have? That involves taking on personal risk in many countries, it’s highly visible to the authorities, and unless you’re surrounded by people who need to use it you have no benefit from the activity.

Between Iran coin and Dogecoin, I know which one people should mine themselves and exchange locally because it's unique and scarce and usable for trade!

Pretty simple, ban it from the banking system. Also, reach out to Europe and Canada to do the same.

China, Russia, Iran, and even Venezuela can play with cryptocurrencies, but when the money needs to go elsewhere, it has to be in a currency that people have faith in and is accepted everywhere.

The Iranian government routinely makes grand announcements about new technology developments, but seldom actually gets much deployed. This is probably more of the same propaganda.

Despite what the US government might think, the fact that such an article exists (reliably sourced or not) is absolutely a validation of the technology behind cryptocurrency.

Seems like going with an existing established crypto currency would would make converting into any other currency much easier and much more difficult to regulate.

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