Last week, Iran's national currency, the rial, fell to a record low against the U.S. dollar. 112,000 rials is being offered on the black market for 1 U.S. dollar. In general, the national currency has devalued by three times over the year.
The government blamed the devaluation of the country's legal tender on the head of the National Bank of Iran and sacked him. The Iranians fear that the country's economy may collapse. This fear is fueled by the restrictions imposed by the government on the circulation of foreign currency inside the country and cruel punishment for violation of these rules. The Iranians found themselves in quite a conundrum, and it provoked the outflow of capital in the direction of the digital currencies market.
Despite the fact that in April of this year, Iran banned Bitcoin and other cryptocurrencies, according to the most superficial estimates, Iranians poured at least $2.5 billion into the crypto market. The market for virtual currencies, in this case, was an excellent hedge against the unstable, inflation-prone rial.
The rial has no prospects in the context of a flaring trade war with the United States. The government of Donald Trump initiated a new wave of sanctions against the Middle Eastern country and actively encouraged the European Union to do so as well. American companies are forbidden from doing business relations with Iranian counterparts and settle with them in U.S. dollars. The first wave of sanctions will come into force from any day. The auto industry will have to part with Iranian partners on August 6. The energy sector received a postponement until November. In November, an embargo is being imposed on the purchase of Iranian oil.
The growing interest in the cryptocurrency market in Iran is part of a trend in which economically isolated countries use virtual assets as a tool to circumvent sanctions and other trade barriers. They are increasingly becoming significant players in the global virtual trading system.
For decades, Iran has repeatedly faced international monetary and financial constraints, which have recently been reinforced by the United States. Currently, the country does not have access to standard financial processing systems, such as Mastercard, Visa, or PayPal. Iranian banks cannot use the Swift Network for the international transfer of payments. Thus, it is not surprising that companies turn to crypto resources, which offer solutions to all these problems. Individuals are also embracing this alternative.
Apart from Iran, other countries that have come under U.S. sanctions are beginning to consider cryptocurrencies as a tool for undermining the dominance of the U.S. dollar on the international market. For example, Venezuela, in an attempt to evade U.S. sanctions, issued the official state cryptocurrency, the petro, backing it with oil and other raw materials. The U.S. government immediately banned companies and citizens of their country from participating in the project. The project itself turned out to be unconvincing. The initial cost of the petro fell from the starting price of $60 to $16.50. The President of Venezuela announced, however, that he wants to bind the national currency to the petro.
Countries that have been subjected to international sanctions have found themselves in a contradictory situation. They are well aware that, on the one hand, the cryptocurrencies are undermining their own centralized monetary system and allow them to carry out economic activities outside state supervision, and on the other, they are becoming a powerful tool for promoting financial interests in the conditions of an economic blockade and breaking through the U.S. trade embargo.
The key conclusion from this scenario is the fact that political and financial world leaders are still far from strong positions in relation to the legitimacy of digital assets. They realize that virtual finance is changing many aspects of the modern world, but they still reluctantly agree that part of this system involves the decentralization of capital, and government financial institutions are losing control of the global monetary system. The unlimited nature of the crypto market certainly works in the interests of sanctioned states in their desire to undermine American sanctions, but also in the interests of the people seeking to preserve their savings, regardless of the policies of governments.
A large site of hotel booking website in Iran, Hotels In Iran, already accepts payments in cryptocurrency.