Amid rising speculation whether Catalonia will adopt some cryptocurrency should it follow through with plans for independence, and in the context of articles such as this from Vice that “Russia is going all in on bitcoin”, one country appears to be preparing to accept bitcoin as digital legal tender: Iran.
In an interview published last week with the Farsi newspaper Shargh, the Iranian Deputy Minister of Information and Communication Technology, Amir Hossein Davaee said that”The ministry of communications and information technology has already conducted a number of research studies as part of efforts to prepare the infrastructure to use Bitcoin inside the country.”
He went on saying the crypto currency has two aspects: Economic and infrastructural. “We as the main center in Iran dealing with the country’s technology developments have taken very seriously the issue of preparing the infrastructure for the new currency.”
Quoted by the Iran Front Page, the Iranian official went on to say that such digital infrastructure is part of the soft power of each country and said entrance of the currency into Iran will end up in the general interests of the country. “Arrangements are being made with the related organizations to put together the infrastructure as early as possible.”
One reason for Iran’s eagerness to escape a dollar-denominated world is that as part of the original sanctions against the country four years ago, SWIFT removed Iran from its network, cutting off the country’s banking system from global networks and making dollar-denominated transactions impossible, in the process crippling Iran’s oil exports which only came online following Obama’s nuclear deal. Being locked out of US dollar commerce, Iran’s economy suffered for many years from financial sanctions which crippled the ability of local exporters and importers from working with international counterparts.
With US President Donald Trump taking a hostile approach to the Islamic republic, and with the Nuclear deal on the verge of collapse due to disagreements over the country’s nuclear and ballistic missile programs, it should come as no surprise that Iran is testing how to bypass possible new financial sanctions using Bitcoin, beyond merely local use.
* * *
Meanwhile, speaking at a Russia and China heads of government meeting on Wednesday, Russian Prime Minister Dmitry Medvedev said that the international financial system needs to balance which is why there is no place for a dominant currency, referencing the US dollar.
“The balanced system of financial relations should be based on the use of various reserve currencies, various forms of settlement. There should be no domination of any one currency,” Medvedev said, adding that no matter how strong the American economy, it also faces problems from time to time. “As a result, the entire financial world is shaken. A more balanced international financial system is better for everyone.”
According to Medvedev, Russia was pleased with the growing role of the Chinese yuan in global settlements, as it represents one of the world’s largest economies. In May, Russia and China established an investment fund worth 68 billion yuan ($10 billion).The countries also plan to extend the bilateral currency swap agreement for another three years. In 2014, Russia and China agreed on a 3-year ruble-yuan currency swap deal of up to $25 billion.
China has been pushing for a greater use of the yuan in oil settlements. As the country has become the largest oil importer overtaking the United States, it can now dictate rules, experts note. The chief economist and managing director at High Frequency Economics Carl Weinberg has predicted that “Chinese [oil] demand will dwarf US demand,” and Beijing is likely to “compel” Saudi Arabia to sell crude oil in yuan, a move to be followed by others. We discussed this last week, when we noted that China is expected to roll out a yuan-denominated oil contract, i.e. a “Petroyuan”, within the next two months.