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Iran to Launch State-Backed Cryptocurrency to Counter SWIFT and US Regulations

89 points by riya_876 8y ago

tyingq 8y ago
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".
- tgraham 8y ago
  Via payment processors ... prevent people buying this currency / trading at exchanges that enable it?
  - jake_the_third 8y ago
    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.
    - devereaux 8y ago
      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!
    - notahacker 8y ago
      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)
    - acdha 8y ago
      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.
- aNoob7000 8y ago
  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.
- acdha 8y ago
  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.
  - pepesza 8y ago
    Not all cryptocurrencies add public record. Examples: ZCash, Grin.
lawlington 8y ago
Worked well for Venezuela, go for it lol
devereaux 8y ago
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.
A4ET8a8uTh0 8y ago
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'
- gcb0 8y ago
  if you're an authority on the matter and consider the news pure noise, why share it anywhere?
  - jdfiugikdf823 8y ago
    Identifying noise is a valuable service for interested parties.
amiraliakbari 8y ago
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)
- rdl 8y ago
  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.
  - runeks 8y ago
    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.
- gcb0 8y ago
  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.
chvid 8y ago
What are these things exactly (this and Venezuela's "petro")? Tokens on the eth blockchain? Something else?
- chabes 8y ago
  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..
- gammateam 8y ago
  Regarding Petro they supposedly launched on NEM about a year ago, but nobody can tell you the contract address. A lot of basics missing.
- qwerty456127 8y ago
  > 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?
mihaifm 8y ago
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.
- acdha 8y ago
  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.
  - gammateam 8y ago
    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.
    - acdha 8y ago
      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.
rdl 8y ago
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.
- zozbot123 8y ago
  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.
forgotAgain 8y ago
Another Kodak Moment.
aboutruby 8y ago
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.
toss1 8y ago
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.
xiphias2 8y ago
Link to original article: https://www.aljazeera.com/news/2019/01/iran-inches-closer-unveiling-state-backed-cryptocurrency-190127060320571.html https://www.aljazeera.com/news/2019/01/iran-inches-closer-un...
HashThis 8y ago
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.
- mihaifm 8y ago
  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.
wonderwonder 8y ago
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.
- dragonwriter 8y ago
  > 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.
  - Red_Pill_Phil 8y ago
    This. You can't prevent the use of crypto because you can't attack any single point of failure.
    - wonderwonder 8y ago
      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.
bitxbitxbitcoin 8y ago
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.
nradov 8y ago
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.

89 points by riya_876 8y ago

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".

tgraham 8y ago
Via payment processors ... prevent people buying this currency / trading at exchanges that enable it?
- jake_the_third 8y ago
  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.
  - devereaux 8y ago
    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!
  - notahacker 8y ago
    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)
  - acdha 8y ago
    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.
aNoob7000 8y ago
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.
acdha 8y ago
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.
- pepesza 8y ago
  Not all cryptocurrencies add public record. Examples: ZCash, Grin.

lawlington 8y ago

Worked well for Venezuela, go for it lol

devereaux 8y ago

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.

A4ET8a8uTh0 8y ago

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'

gcb0 8y ago
if you're an authority on the matter and consider the news pure noise, why share it anywhere?
- jdfiugikdf823 8y ago
  Identifying noise is a valuable service for interested parties.

amiraliakbari 8y ago

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)

rdl 8y ago
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.
- runeks 8y ago
  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.
gcb0 8y ago
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.

chvid 8y ago

What are these things exactly (this and Venezuela's "petro")? Tokens on the eth blockchain? Something else?

chabes 8y ago
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..
gammateam 8y ago
Regarding Petro they supposedly launched on NEM about a year ago, but nobody can tell you the contract address. A lot of basics missing.
qwerty456127 8y ago
> 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?

mihaifm 8y ago

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.

acdha 8y ago
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.
- gammateam 8y ago
  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.
  - acdha 8y ago
    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.

rdl 8y ago

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.

zozbot123 8y ago
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.

forgotAgain 8y ago

Another Kodak Moment.

aboutruby 8y ago

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.

toss1 8y ago

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.

xiphias2 8y ago

Link to original article: https://www.aljazeera.com/news/2019/01/iran-inches-closer-unveiling-state-backed-cryptocurrency-190127060320571.html https://www.aljazeera.com/news/2019/01/iran-inches-closer-un...

HashThis 8y ago

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.

mihaifm 8y ago
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.

wonderwonder 8y ago

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.

dragonwriter 8y ago
> 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.
- Red_Pill_Phil 8y ago
  This. You can't prevent the use of crypto because you can't attack any single point of failure.
  - wonderwonder 8y ago
    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.

bitxbitxbitcoin 8y ago

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.

nradov 8y ago

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.