With the deepening of the country’s economic crisis, the Iranian government has adopted Bitcoin for international trade, the number of Covid-19 cases has increased, the rial has depreciated, and the US government has also increased sanctions.
Iran’s economic woes are magnified
With the surge in Covid-19 cases, Iran is suffering from a severe economic crisis. The Iranian Ministry of Health said that the number of Covid-19 infections per day has more than tripled in less than two months. In addition, the US government has imposed more and more sanctions on Iran, while the local legal currency, the rial, continues to fall sharply.
Steve H. Hanke, professor of applied economics at Johns Hopkins University and an expert on hyperinflation, described the situation in Iran as a “classical death spiral.” He detailed on Wednesday:
Since January 1, 20, the rial has depreciated against the US dollar in the free market by 54.23%. According to my measurement, the inflation rate has risen from 21.89%/year to 158.31%/year.
Bitcoin: a solution to the Iranian problem
Although Iran has long been pro-Bitcoin and has been monitoring the cryptocurrency industry since August 2019, the country took major steps last week to increase the adoption rate of cryptocurrencies to a new level. The IRNA publication reported that the Iranian cabinet revised the cryptocurrency legislation based on a joint proposal by the CBI and the Iranian Ministry of Energy to enable the central bank to use cryptocurrency to pay for imports. This may also help the central bank circumvent restrictions imposed by the US government.
Although the government is still studying the details of how to do this, the publication reported that licensed bitcoin miners in the country will have to sell their coins directly to the central bank. The Iranian Daily describes:
The Iranian government has amended its regulations on cryptocurrency to allow it to be used exclusively to finance imports when the country’s normal use of hard currency is under increasing pressure.
The news media continued: “According to the law, cryptocurrencies legally mined in Iran can only be exchanged when used to finance imports from other countries.” “Miners should directly provide original encryption to the channels introduced by CBI within authorized limits. Currency.” In addition, “the legal upper limit of the amount of cryptocurrency per miner will be determined by the level of subsidized energy used for mining and instructions issued by the Ministry of Energy.”
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