Cryptocurrency and its underlying technology blockchain are seen as efficient solutions for improving economic conditions in underdeveloped regions. However, data has it that crypto-related activities in Iran are largely concentrated in the industrial regions.
The cutting-edge technology has already begun transforming the traditional financial systems across the world. The peer-to-peer nature of the coins allows users to make transactions directly without government or central bank intervention. One outcome is reduced transaction fees and unnecessary costs.
Besides the range of services cryptocurrency-based platforms offer users, the cutting-edge technology is seen as an efficient solution to challenges in underdeveloped areas. Some governments are adopting policies to use cryptos to promote the peoples’ financial inclusion.
Iranians too are getting involved in the crypto landscape – slowly but steadily. An estimated 12 to 15 million own cryptocurrencies, according to recent studies. Reports say daily crypto trade by Iranians has overtaken business conducted in the share market. However, it seems that most of the crypto trade is in the provinces with the highest contribution to the gross domestic production.
As per data released by the Statistical Center of Iran, Tehran Province accounted for 22.1% or almost one-fifth of Iran’s GDP in fiscal 2019-20.
Tehran, Khuzestan, Bushehr, Isfahan, Khorasan Razavi, Fars, East Azarbaijan, Mazandaran, Alborz and Kerman provinces accounted for more than 70% of Iran’s total GDP in the year to March 2020.
A recent report by a major Iranian crypto exchange shows that nearly 26% of crypto traders were Tehran residents followed by Khorasan Razavi and East Azarbaijan provinces at 9.6% and 7%, respectively. Isfahan Province, Khuzestan Province and Fars ranked after.
The report also said that Ilam and Sistan-Balouchestan provinces accounted for the least crypto trade in 2021, less than 1%.
SCI figures also show that Ilam Province had the least contribution to the GDP (0.5%). Sistan-Baluchestan accounted for about 1.6% of the GDP in the year ending March 2020.
An increasing number of people have gone into cryptomining in Iran in the past two years and their numbers are growing. The trend prompted the former government to craft stricter rules and impose restrictions on cryptomining, reportedly to curb illegal use of subsidized electricity.
As per rules, cryptocurrency mining is recognized as an industry in Iran. Miners must acquire license from the Ministry of Industries and pay their electricity bills based on export rates. Existing regulations ban trade in cryptocurrency.
In the past two years the Iran Power Generation, Distribution and Transmission Company (Tavanir) has launched a national-wide crackdown on illegal crypto mining centers on the premise that they are a burden on the national power grid, especially during summer. Almost 5,144 centers involved in illegal cryptomining have been shut since last year.
According to official reports, Tehran Province accounted for the largest number of illegal digital currency miners followed by Khorasan Razavi and East Azarbaijan provinces and some southern regions where electricity rates are lower due to the hot climate.
No unlicensed mining farm has been reported in Hormozgan and Kohgilouyeh and Boyer-Ahmad provinces. The share of detected illegal mining centers was less than 5% in most of the less developed regions such as Ilam, North and South Khorasan.
Need for Efficient Regulations
Growing interest in crypto mining and trading plus the rapid growth in illegal mining centers has pushed policymakers to come up with strong rules to address the loopholes.
However, the issue, experts say, is more complex than previous regulatory challenges. The obvious result has been that no state organization wants a role in this sector or accept responsibility whatsoever.
To address the challenges, the Raisi administration has reportedly prepared proposals to regulate digital assets and cryptocurrencies and asked private enterprises to send their views and suggestions.
Observers, however, are not impressed and say it fails to address drawbacks and deficiencies in the existing regulations that have long deprived the sector of the growth it deserves.
This is while policymakers and their proactive decisions are seen as a driving force to make the best use of the new technology.
Experts have called on successive governments in Tehran to focus their efforts around knowledge building and skill development in blockchain technology to ensure that they are not left behind.
The technology has high potential for fostering small and medium size companies mainly in the developing world.
In a recent report the World Economic Forum said, "Blockchain usage is particularly alluring for small businesses. It provides them an affordable and efficient avenue to make and receive payments, access investment and savings products, and build a credit history.
"Enabling greater access to this technology can foster SME growth, which, in turn, enhances job creation and economic development."
A recent blog post on International Monetary Fund's website said, "The challenges are significant, and so is the potential reward. But policy action must begin immediately."
Policymakers need to establish legal and regulatory frameworks that will drive innovation for the benefit of all countries while mitigating risks, reads the blog post.
