iran

Iran completes pre-pilot phase of central bank digital currency

The Central Bank of Iran progresses with CBDC development in anticipation of a visit by the Bank of Russia’s governor Elvira Nabiullina.

Iran is moving forward with its central bank digital currency (CBDC) plans, completing preliminary research for the launch of a potential digital rial.

The Central Bank of Iran (CBI) has completed a pre-pilot phase in the development of Iran’s CBDC, according to an official statement by CBI’s research arm, the Monetary and Banking Research Institute (MBRI).

Mohammad Reza Mani Yekta, head of the CBI office for supervising payment systems, announced the news at the ninth annual conference on electronic banking and payment systems on Feb. 20. He noted that Iran’s central bank plans to increase the scope of the CBDC pilot in the country’s payment system, but doesn’t want to rush its implementation.

“The pre-pilot phase ended successfully with valuable achievements. The project will soon be launched in other ecosystems and will be used by more users,” Mani Yekta stated.

The executive pointed out that the rules governing a potential digital rial will align with those established for rial banknotes. Mani Yekta also noted that a digital rial would be distributed among individuals and banks, with the CBDC infrastructure recreating some blockchain features.

Mani Yekta reportedly said that ten banks in Iran have applied to join the digital rial project. Banks like Bank Melli, Bank Mellat and Bank Tejarat were involved in the experimental phase. All banks and credit institutions in Iran are reportedly expected to start offering electronic wallets for using the upcoming digital currency.

As previously reported, the CBI started planning to launch a CBDC pilot in January 2022, following years of initial research since 2017. The regulator reportedly started rolling out a CBDC pilot in September 2022, aiming to improve financial inclusion and compete with global stablecoins.

Iran’s digital rial project, called the “crypto rial,” is pegged to the national currency, the Iranian rial, at a 1:1 ratio. The digital currency reportedly runs on a platform known as Borna, which was developed using Hyperledger Fabric, the open-source enterprise blockchain platform established by United States technology giant IBM.

The news comes amid the Iranian authorities preparing to hold an official meeting with the Bank of Russia’s governor Elvira Nabiullina, who is expected to visit Iran in the near future. Russia and Iran have reportedly been working together to create a gold-backed stablecoin that would serve as a payment method in foreign trade.

Enforcement goes on with Bitzlato action: Law Decoded, Jan. 16–23

Anatoly Legkodymov, founder of China-based crypto firm Bitzlato, was arrested under suspicion of money laundering related to illicit Russian finance.

The good news of the last week is that Bitcoin (BTC) has continued to rebound, making around 10% up from Jan. 16 to Jan. 23. But the worrying trend of crypto companies making headlines due to their troubles with the law has yet to change.

The United States Department of Justice launched a “major international cryptocurrency enforcement action” against China-based crypto firm Bitzlato and arrested its founder, Anatoly Legkodymov. The department considers Bitzlato to be a “primary money laundering concern” connected to Russian illicit finance. While the exchange attracted little attention until the DOJ action, it had reportedlyreceived $206 million from darknet markets, $224.5 million from scams and $9 million from ransomware attackers.

The United States Financial Crimes Enforcement Network stated that crypto exchange Binance was among the “top three receiving counterparties” of Bitzlato in terms of Bitcoin transactions. However, it didn’t mention Binance as being among the top sending counterparties.

The United States Securities and Exchange Commission has followed the Commodity Futures Trading Commission in filing parallel charges against the crypto user allegedly behind the multimillion-dollar exploit of decentralized exchange Mango Markets. Avraham Eisenberg is accused of manipulating Mango Markets’ MNGO governance token to steal roughly $116 million worth of cryptocurrency from the platform.

Iran and Russia want to issue new stablecoin backed by gold

The Central Bank of Iran is reportedly cooperating with the Russian government to jointly issue a new cryptocurrency backed by gold. The “token of the Persian Gulf region” would serve as a payment method in foreign trade. The stablecoin aims to enable cross-border transactions instead of fiat currencies like the United States dollar, the Russian ruble or the Iranian rial. Reportedly, the potential cryptocurrency would operate in a special economic zone in Astrakhan, where Russia started to accept Iranian cargo shipments.

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EU postpones final vote on MiCA for the second time

The final vote on the European Union’s much-awaited set of crypto rules, the Markets in Crypto Assets (MiCA) regulation, was deferred to April 2023. It marks the second delay in the final vote, which was previously postponed from November 2022 to February 2023. The latest delay is due to a technical issue where the official 400-page document couldn’t be translated into the 24 official languages of the EU. Legal documents like the MiCA, which are drafted in English, must comply with EU regulations and be published in all 24 official languages of the union.

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Japanese regulators want crypto treated like traditional banks

“If you like to implement effective regulation, you have to do the same as you regulate and supervise traditional institutions,” said the deputy director-general of Japan’s Financial Services Agency’s Strategy Development and Management Bureau, Mamoru Yanase. The official added that countries “need to firmly demand” consumer protection measures from crypto exchanges, also asking for money laundering prevention, strong governance, internal controls, auditing and disclosure for crypto brokerages.

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Central African Republic eyes legal framework for crypto adoption

Iran and Russia want to issue new stablecoin backed by gold

The potential stablecoin aims to enable cross-border transactions instead of fiat currencies like the U.S. dollar, the Russian ruble or the Iranian rial.

The Central Bank of Iran is reportedly cooperating with the Russian government to jointly issue a new cryptocurrency backed by gold.

According to the Russian news agency Vedomosti, Iran is working with Russia to create a “token of the Persian Gulf region” that would serve as a payment method in foreign trade.

The token is projected to be issued in the form of a stablecoin backed by gold, according to Alexander Brazhnikov, executive director of the Russian Association of Crypto Industry and Blockchain.

The stablecoin aims to enable cross-border transactions instead of fiat currencies like the United States dollar, the Russian ruble or the Iranian rial. The report notes that the potential cryptocurrency would operate in a special economic zone in Astrakhan, where Russia started to accept Iranian cargo shipments.

Russian lawmaker Anton Tkachev, a member of the Committee on Information Policy, Information Technology and Communications, stressed that a joint stablecoin project would only be possible once the digital asset market is fully regulated in Russia. After multiple delays, the Russian lower house of parliament once again promised to start regulating crypto transactions in 2023.

Iran and Russia are among the countries that banned their residents from using cryptocurrencies like Bitcoin (BTC) and stablecoins like Tether (USDT) for payments. At the same time, Iran and Russia have been actively working to adopt crypto as a tool of foreign trade.

In August 2022, Iran’s Industry, Mines and Trade Ministry approved the use of cryptocurrency for imports into the country amid ongoing international trade sanctions. The local government said the new measures would help Iran mitigate global trade sanctions. Iran subsequently placed its first international import order using $10 million worth of crypto.

The Bank of Russia — historically opposed to using crypto as a payment method — agreed to allow crypto in foreign trade to mitigate the impact of international sanctions. The regulator has never clarified which cryptocurrencies would be used for such transactions though.

Iran court orders the release of seized crypto mining equipment

Judicial rulings require Iranian authorities to release a part of the 150,000 crypto mining equipment previously seized due to energy concerns.

Iranian authorities seized numerous crypto mining equipment over the past two years, citing stress on energy grids during winter. Now, a court ordered the release of crypto-mining equipment that was previously seized as a measure to conserve energy.

Since 2021, Iran’s Organization for Collection and Sale of State-Owned Property (OCSSOP) has seized mining equipment — both authorized and unauthorized — due to looming power shortage concerns. However, the authorities had a change of heart amid winter as they ordered the release of the seizure. As explained by Abdolmajid Eshtehadi, the head of Iran’s Ministry of Economic Affairs and Finance:

“Currently some 150,000 crypto mining equipment are held by the OCSSOP, a large part of which will be released following judicial rulings. Machines have already been returned.”

However, Eshtehadi believed the recently released mining equipment could add stress to the country’s energy grids. He suggested that the Generation and Transmission Company of Iran (TAVANIR) must propose plans for the use of the hardware to avoid undue stress on the nation’s grid system.

*Country-wise Bitcoin hash rate contribution. Source: Cambridge Center for Alternative Finance*

Back in June 2022, Iran had to cut the power supply for legal mining firms as the country’s electricity consumption recorded an all-time high of 62,500 megawatts (MW) during peak consumption. At the time, Iran used to account for 0.12% of the global Bitcoin (BTC) hash rate, which has now increased to 0.2%, as shown in the above graph.

Iran’s energy concerns become evident when considering the recent laws imposing a fine for the illegal use of subsidized energy in crypto mining.

On the flip side, Denver-based Crusoe Energy aims to help Oman, a gas-rich Middle Eastern country, cut down on gas flaring — the burning of natural gas associated with oil extraction.

Crusoe Energy announced plans to open up a pilot project in Muscat, Oman, to repurpose the gas flaring energy into powering mining computers. This initiative will aid Oman’s goal of zero-gas flaring by 2030.

Proactive sanctions can help spare the ecosystem: Chainalysis exec

Andrew Fierman highlighted the nuances of sanctions depending on who is involved, what is at stake and where they’re coming from.

As many countries, entities and even individuals face international sanctions, the crypto industry seeks to find its place among increasing regulations.

Digital currencies have often been mentioned as an avenue for those subject to sanctions to divert them, such as in the recent case of Russia. In such instances, exchanges and other industry players need to understand where they stand compliance-wise.

Research out of Harvard even suggested that central banks can use Bitcoin (BTC) to fight off sanctions.

Speaking to Cointelegraph’s managing editor Alex Cohen at the Israel Crypto Conference, Chainalysis head of sanctions Andrew Fierman said sanctions are nuanced depending on the many factors which surround the situation.

“When you’re looking at countries like Iran and North Korea, from a US perspective, crypto has in fact been comprehensively sanctioned.”

He said Russia is a bit of a “different story,” as there are entity-based sanctions like companies and individuals that have been sanctioned by the United States. Along with industry-based sanctions (energy, military, etc.), all of which create a cloudy nuance around the situation.

“That’s been one of the big challenges within the industry at large. Not only in crypto but traditional finance as well.”

However, Fierman said there are methods in which major industry players could spare the ecosystem from major headaches.

“Proactively sanctioning entities and actors that are operating in a damaging way to the ecosystem is an effective way to help stop them from interacting with the ecosystem at all.”

Fierman continued to say that there are a lot of opportunities to stop illicit activity in the industry if actors are working on the blockchain.

Fierman highlighted a few recent cases of compliance enforcement from governmental entities such as the Office of Foreign Assets Control (OFAC). One of which involved the centralized exchange Kraken which was fined hundreds of thousands from OFAC, along with Bitfinex which received an even heftier fine.

“In both instances, these really show a path for entities in space to take the right approach.”

According to the head of sanctions, one of the big trends in the industry has been IP blocking and having ongoing monitoring of IP activity. This doesn’t just account for the point of “know your customer” procedures to verify user identity, but also where users login from to search for inconsistencies.

Forecasts predict crypto-related, cross-chain money laundering to reach $10 billion by 2025.

Kraken settles with US Treasury’s OFAC for violating US sanctions

The U.S.-based crypto exchange agreed to pay more than $362,000 as part of a deal “to settle its potential civil liability” related to violating sanctions against Iran.

The United States Treasury Department’s Office of Foreign Assets Control, or OFAC, has announced a settlement with crypto exchange Kraken for “apparent violations of sanctions against Iran.”

In a Nov. 28 announcement, OFAC said Kraken had agreed to pay more than $362,000 as part of a deal “to settle its potential civil liability” related to violating the United States’ sanctions against Iran. The U.S.-based crypto exchange will also be investing $100,000 into sanctions compliance controls as part of the agreement with Treasury.

“Due to Kraken’s failure to timely implement appropriate geolocation tools, including an automated internet protocol (IP) address blocking system, Kraken exported services to users who appeared to be in Iran when they engaged in virtual currency transactions on Kraken’s platform,” said OFAC.

In a statement to Cointelegraph, Kraken chief legal officer Marco Santori said the exchange had “voluntarily self-reported and swiftly corrected” its actions to OFAC:

“Even before entering into this resolution, Kraken had taken a series of steps to bolster our compliance measures. This includes further strengthening control systems, expanding our compliance team and enhancing training and accountability.”

The United States has imposed sanctions on Iran that prohibit the export of goods or services to businesses and individuals in the country since 1979. However, Kraken had allegedly been violating these controls since 2019 by allowing a reported more than 1,500 individuals with residences in Iran to have accounts at Kraken — giving them the means to buy and sell crypto.

According to a July report from The New York Times, then CEO Jesse Powell — who in September announced he would step down — suggested he would consider breaking the law, through not specifically mentioning sanctions, if the benefits to Kraken outweighed any potential financial or legal penalties. The crypto exchange also reportedly allowed access to crypto for individuals in Syria and Cuba, countries sanctioned by the United States.

In September 2021, the U.S. Commodity Futures Trading Commission ordered Kraken to pay more than $1 million in civil monetary penalties for allegedly violating the Commodity Exchange Act by offering “margined retail commodity transactions in digital assets” to ineligible U.S. customers from June 2020 to July 2021. Kraken’s incoming CEO, Dave Ripley, said in September he did not see a reason to register with the Securities and Exchange Commission as “there are not any tokens out there that are securities that we’re interested in listing.”

Iran to begin ‘crypto rial’ CBDC trial despite possible lack of infrastructure: Report

The crypto rial has been in preparation for years; its introduction comes on the heels of the country’s introduction of cryptocurrency for foreign trade.

The Central Bank of Iran will make a pilot launch of a central bank digital currency (CBDC) on Thursda, the Iranian Chamber of Commerce has announced. The so-called “crypto-rial” has been in the planning stage for several years.

The launch of the crypto rial was originally planned for November, according to the Chamber, which said the CBDC was intended “to help improve financial inclusion and function as a powerful tool for the CBI to compete with other stable coins globally.” It added that experts within the country had concerns about businesses’ preparedness to use a CBDC, the public’s understanding of digital wallets and the effect the introduction would have on banks.

Iran begins pilot launch of crypto-rial tomorrow: Central Bank of Iran (CBI) said on Wednesday that it will begin the pilot launch of crypto-rial as the bank’s digital currency as of Thursday. https://t.co/6rWpGSkQJR pic.twitter.com/S9rDgEgjio

— Tehran Bazaar (@TehranBazaar) September 21, 2022

The crypto rial has also been seen as a means of counteracting the corruption that is pervasive in Iran. Development of the crypto rial began in 2018, and the Central Bank has been promising to trial the CBDC all year.

Al Jazeera reports that the CBDC will operate on the Borna platform, developed using the Hyperledger Fabric, an IBM open-source distributed ledger technology platform. The news agency adds that banks will trade paper rials for an electronic one. Since the platform is permissioned, the central bank will select banks to participate.

Borna wasy adopted in 2019 to help modernize the outdated Iranian banking system. According to an Al Jazeera source, the Borna platform will allow for the provision of fee-based financial services, although that will not be part of the current trial.

The use of cryptocurrency for payments inside Iran is prohibited, but in August, Iranians began to use crypto to pay for imports, leading to concerns among Iranian businesses about the lack of cryptocurrency regulation. The Iran Blockchain Association has made similar appeals in the past.

US Treasury sanctions Iran-based ransomware group and associated Bitcoin addresses

The Office of Foreign Asset Control sanctioned 7 Bitcoin addresses allegedly connected to Iranian nationals Ahmad Khatibi Aghada and Amir Hossein Nikaeed Ravar.

The United States Treasury Department’s Office of Foreign Asset Control has added 10 individuals, 2 entities, and several crypto addresses allegedly tied to an Iranian ransomware group to its list of Specially Designated Nationals, effectively making it illegal for U.S. persons and companies to engage with them.

In a Wednesday announcement, the U.S. Treasury said the individuals and companies in the ransomware group were affiliated with Iran’s Islamic Revolutionary Guard Corps, a branch of the country’s military. The group allegedly “conducted a varied range of malicious cyber-enabled activities,” including compromising the systems of a U.S.-based children’s hospital in June 2021 and targeting “U.S. and Middle Eastern defense, diplomatic, and government personnel.”

OFAC listed 7 Bitcoin (BTC) addresses allegedly connected to 2 of the Iranian nationals — Ahmad Khatibi Aghada and Amir Hossein Nikaeed Ravar — as part of its secondary sanctions. According to the Treasury Department, Khatibi has been associated with technology and computer services firm Afkar System — one of two entities sanctioned in the same announcement — since 2007. The governmental department alleged Nikaeed “leased and registered network infrastructure” to assist the ransomware group.

“Ransomware actors and other cybercriminals, regardless of their national origin or base of operations, have targeted businesses and critical infrastructure across the board — directly threatening the physical security and economy of the United States and other nations,” said Brian Nelson, undersecretary of the Treasury for Terrorism and Financial Intelligence. “We will continue to take coordination action with our global partners to combat and deter ransomware threats.”

In a coordinated action across the U.S. Government, OFAC designated a dozen Iran-based persons for their roles in malicious cyber acts, including ransomware activity. The U.S., Australia, Canada & the UK are also publishing a joint cyber security advisory. https://t.co/OVnr3jprBA

— Treasury Department (@USTreasury) September 14, 2022

The notice came as the Justice Department announced an indictment against Khatibi, Nikaeed and Mansour Ahmadi — also one of the individuals listed in OFAC’s sanctions — for allegedly “orchestrating a scheme to hack into the computer networks” of entities and individuals in the United States, including the attacks cited by the Treasury. According to the Justice Department, the Iranian ransomware group targeted a New Jersey-based accounting firm in February 2022, having Khatibi demand $50,000 in cryptocurrency in exchange for not selling the company’s data on the black market.

On Aug. 8, OFAC added more than 40 cryptocurrency addresses connected to controversial mixer Tornado Cash to its list of Specially Designated Nationals, prompting criticism from many figures in and out of the space. Treasury clarified on Tuesday that U.S. persons and entities were not prohibited from sharing Tornado Cash’s code, but also required a special license to complete transactions initiated before the sanctions were imposed or make withdrawals.

Iranian businesses get the green light to use crypto for imports

Iran’s Trade Ministry has approved the use of cryptocurrency payments for imports in a bid to bolster trade in the country.

Iran’s Industry, Mines and Trade Ministry has approved the use of cryptocurrency for imports into the country amid ongoing international trade sanctions.

According to local news reports, Trade Minister Reza Fatemi Amin confirmed that detailed regulations have been approved outlining the use of cryptocurrencies for trade and supplying fuel and electricity to Bitcoin (BTC) and crypto miners in the country.

Amin outlined the regulatory change at an automotive industry exhibition on Sunday, just a week after the country had placed a first-ever import order for vehicles to the tune of $10 million, using cryptocurrency as a payment method. The Iranian trade ministry had previously indicated that the use of cryptocurrencies and smart contracts would be widely used in foreign trade by September 2022.

Following the cryptocurrency-funded import, Iran’s Import Association called for clear-cut regulatory parameters to ensure that local businesses and importers are not hamstrung by shifting directives.

The minister noted that the new regulations specify all issues related to cryptocurrencies, including the process to grant licenses as well as the provision of fuel and energy to mining operators in the country.

It is understood that local businesses will be able to import vehicles into Iran and a range of different imported goods using cryptocurrencies instead of United States dollar or euro payments.

International trade sanctions against Iran have been largely due to opposition to its nuclear program, which has essentially cut the country out of the global banking system.

Iran has since shifted its attention to adopting cryptocurrencies as a means to address and potentially bypass sanctions for imports, given the decentralized nature of public blockchains like Bitcoin and Ethereum, which are not controlled by government or central authorities.

The Iranian Industry, Mines and Trade Ministry granted operating licenses to 30 crypto mining centers in the country in June 2021, while more than 2,500 permits were approved for the establishment of new mining operations. In the months that followed, the government also cracked down on illegal mining operations and even imposed a three-month ban on mining to alleviate pressure on its national grid.

Iran Import Association demands regulatory clarity to use crypto in foreign trade

Corporate lobbyists urge the government to create a proper infrastructure and avoid the emergence of business rent.

In the aftermath of the first officially reported crypto payment in the sanctioned country’s foreign trade, Iran’s importers point to the necessity of stable regulations to continue trade via cryptocurrencies.

On Saturday local reports cited the head of Iran’s Importers Group and Representatives of Foreign Companies (Import Association), Alireza Managhebi, who emphasized that stable regulations and infrastructure should be prepared to be able to successfully use cryptocurrencies for imports:

“The question is, has the government developed consistent regulations for the cryptocurrency uses so that they will not change within two months and the businessmen active in this field will not be harmed?”

Managhebi also doubted the belief that the official use of cryptocurrencies for imports might end the dollar dominance in the Iranian market and reminded of a possible threat — the new payment method may lead to the emergence of rent-seeking business groups.

On Aug. 10, Iran placed its first international import order using $10 million worth of cryptocurrency. While the official did not disclose any details about the cryptocurrency used or the imported goods involved, Peyman-Pak said that the $10 million order represents the first of many international trades to be settled with crypto.

The Islamic nation has been positioned to embrace cryptocurrencies as early as 2017. In October 2020, it amended previously issued legislation to allow cryptocurrency to be used for funding imports.

In June 2021, the Iranian Trade Ministry issued 30 operating licenses to Irani miners to mine cryptocurrencies, which then must be sold to Iran’s central bank. Iran is now using those mined coins for import payments.