The Iranian parliament is looking to propose regulations that would restrict the activities of cryptocurrency exchanges in the country.
Operating Crypto Exchanges Riskier in Iran
Cryptocurrency exchanges in Iran will find it harder to operate as per the latest proposal by the country’s parliament. According to Iranian news outlet ArzDigital, the country’s parliament published a proposal this week stating that it would be adding cryptocurrencies to the current “currency smuggling” and foreign currency exchange regulations. If the proposal becomes a law, Iranian entrepreneurs in the cryptocurrency sector will face more risk of being jailed by local security authorities or sanctioned by regulatory agencies in the United States.
The new regulation implies that cryptocurrency exchanges in the country have to be licensed by the Central Bank of Iran and abide by the foreign currency exchange guidelines if they are to operate without constraints. However, it is not yet clear how the current crypto exchanges in Iran would apply for licenses or adapt the fiat norms to the blockchain technology. Despite that, it is clear that the Iranian government is looking to slow down the capital flow by preemptively justifying any moves to stop local cryptocurrency exchanges from operating.
Cryptocurrency Exchanges Linked to Iran
The Iranian cryptocurrency exchange market is not solely composed of local over-the-counter traders. Several cryptocurrency exchanges operating in the country are legally based in other countries, which makes it hard to determine how the licensing guidance applies to them.
For instance, CoinMarketCap, which is officially based in Delaware, in the United States, listed the KingMoney token in the first quarter of the year. According to the CSO of Coinmarketcap, Carylyne Chan, there were no obvious red flags from the application process of the token. However, the Bitcoin clone token has been promoted in suspicious ways since its listing. Twitter bot researcher Geoff Golberg pointed out that inauthentic accounts on the social media platform were created to make the token appear more robust before it was listed on CMC.
Cryptocurrency exchange UtByte and the KingMoney token project are registered in Sweden under the Sweden Invest Group AB, which is headed by Swedish-Iranian businessman Reza Khelili Dylami. Some blogs in Iran are labeling the projects as an interconnected scam. However, it was marketed to Iranians for carrying out cross-border remittance.
Chainalysis pointed out that UtByte received roughly $13.8 million in BTC and has strong transactional links to some cryptocurrency services and exchanges in Iran.
This indicates that the Trump administration is right about its concerns regarding Iranians using cryptocurrencies to circumnavigate the sanctions. If cryptocurrency exchanges are registered with the Central Bank of Iran, it would be almost impossible for them to continue to bypass sanctions.
Furthermore, local cryptocurrency projects in Iran also benefit from foreign social media activities. Over the weekend, Tron founder Justin Sun promoted Cryptoland and other crypto exchanges in Iran on Twitter.
The co-founder of Cryptoland, Hassan Golmohammadi, revealed that the company is not legally based in Iran but operates within the country. With most cryptocurrency entities operating in Iran currently based legally outside the country, it would be tough to regulate the activities of these companies. However, Iran is committed to cleaning up its house, and cryptocurrency exchanges operating within the country have to be careful about their business activities, so they do not breach the currency smuggling regulations.