Iranians Purchase $2.5 Billion Worth of Bitcoin as Government Considers Native Oil-Backed Crypto

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Iranians Purchase $2.5 Billion Worth of Bitcoin as Government Considers Native Oil-Backed Crypto

All the talk about bitcoin has made some serious noise in Iran as well. Although few in number the country has customers of cryptocurrency, and in the with the rise of digital currency, the government is planning to adopt this trend.

Mohammad Reza Pourebrahimi, Chairman of the Economic Commission of the Parliament of Iran, strongly believes that a national digital currency is required in the war-stricken nation, and envisions that the world’s future economy would be based on cryptocurrencies.

Pourebrahimi realizes that there is an outflow of huge amounts from the nation in the form of cryptocurrencies. As per a local news report, $2.5 billion has gone out of Iran in the form of bitcoin, as the digital currency is presently the only method to send money out of the country. However, Pourebrahimi feels that this particular cryptographic form of remittance is not transparent and lacks validation.

To tackle this issue, the Iranian government is toying with the idea of a national bank-issued cryptocurrency, backed by the nation’s most prized asset; oil.

Not only would it put an end to the vast outflow of digital money, but it would also increase potential business opportunities for the nation. However, until the nation’s very own crypto is in place, the central bank of Iran has ceased all activities revolving around cryptocurrencies.

However, the oil-backed cryptocurrency may not find favor with many countries, as was recently evidenced by the global backlash on Venezuela’s native oil-backed cryptocurrency – Petro. Adding her thoughts on the topic, is Priscilla Moriuchi, Director of strategic threat development at Recorded Future:

“The petro will struggle to be exchangeable for hard currencies such as the dollar or the euro and this will limit its appeal to investors and users. Iran is likely to experience some of the same hurdles if it decides to create its own oil-backed cryptocurrency.”

Moriuchi also expressed her dissatisfaction with bitcoin’s slow transactions times, which in turn leads to Bitcoin’s protocol being “more observable.” Additionally, she considers litecoin and monero as faster, safer alternatives.

Nevertheless, bitcoin remains a popular choice of remittances via cryptocurrency, and for many users, the only option. Speaking to Forbes, a person wishing to be unnamed, said:

“With exchange offices closed, sanctions and the rial dropping like crazy it seems like a good idea to use Bitcoin. I know that there’s a few people selling and buying Bitcoin in Iran with LocalBitcoins.”

Political Ongoings Cloud Iran’s Economy

All said and done, ever since the nuclear deal of 2015 was signed, a number of companies showed interest in doing business with Iran and conducting payments in bitcoin.

However, there is a flipside to this, as Harry Colvin from Longview Economics says:

“It’s unlikely that energy companies in the west or the developed world will want to use bitcoin on a large scale. It’s pretty easy for individuals to move money overseas via bitcoin, however, and I imagine that’s been happening.”

On March 26, 2018, Iran’s national currency stooped to a new low, and its value against the dollar dropped significantly. The faltering currency wasn’t the only drawback as a weak domestic economy, increased demand for the dollar, and local banks facing financial shortcomings made matters worse.

An initial struggle is inevitable in case Iran decides to go ahead with its oil-backed crypto, as exchanging it with currencies like the euro or dollar could present a barrier. This could limit its luster to potential investors.