Iran is betting on crypto for cross-border trade, in an attempt to circumvent sanctions

Iran has begun using cryptocurrencies to settle trade deals across borders, as the country continues to look for ways to avoid using the US dollar and the international banking system.

In a chirping On August 9, the head of the Iran Trade Promotion Organization (ITPO) Ali Reza Peymanpak said that the first official import order using cryptocurrencies had been placed “this week”.

Peymanpak, who is also the deputy minister of industry, mining and trade, did not say what goods or services were traded, or who the trade had been with, but said the transaction had been worth $10 million.

He went on to say that the use of cryptocurrencies and smart contracts would become “widespread in foreign trade” with some countries in the near future.

It follows news last month that Iran and Russia had taken steps to reduce the use of the dollar in their bilateral trade, launching a settlement system using their own currencies.

In 2019, Iran’s central bank banned cryptocurrency trading in Iran. The country’s electricity grid has been under severe pressure at times due to the large amount of cryptocurrency “mining” in the country, leading to widespread power outages. However, the government allows bitcoin and other cryptocurrencies to be used for international trade, as a way to circumvent US sanctions.

In January Iran’s Mehr The news agency reported that an agreement had been reached between the ITPO and the country’s central bank to allow the use of cryptocurrencies in cross-border trade, saying at the time that the system would be up and running “within the next two weeks”.

“These cryptocurrencies and blockchain systems have a lot of practical discussions in business cases,” Peymanpak said Mehr in January. “If we neglect it, we will lose a large part of the business opportunity.” He went on to say that “In our main markets, such as Russia, China, India and Southeast Asia, the use of cryptocurrencies is popular.”

While cryptocurrencies can be useful for Iranians trying to avoid sanctions, measures are being taken by the US government to crack down where they can. New York Times reported in July that cryptocurrency exchange Kraken was under federal investigation over suspicions that it had allowed users in Iran to buy and sell digital tokens. Another exchange, Binance, has also faced allegations that it processed trades from customers in Iran despite international sanctions.

There are of course other risks for Iran and any counterparty in a trade, not least the volatility of most digital currencies.