Iran Intensifies Crackdown on Cryptocurrencies Amid Currency Crisis

Tehran, Iran – In a significant escalation of its ongoing campaign against digital currencies, Iranian authorities have imposed stringent restrictions on cryptocurrency transactions as the Iranian rial continues its rapid decline against the US dollar. The Central Bank of Iran (CBI) recently implemented a ban on rial payments within all cryptocurrency exchanges, leaving over 10 million Iranian crypto users unable to utilize their national currency to purchase Bitcoin and other global digital currencies.

A Response to Economic Instability

The central bank’s decision aims to counter the ongoing depreciation of the rial, which has hit an all-time low of more than 940,000 rials per US dollar—a stark decline from less than 600,000 rials just a year ago. The move is seen as part of broader governmental efforts to exert control over an economy plagued by more than four years of inflation exceeding 40 percent, amid stringent Western sanctions and geopolitical tensions that have further isolated Iran’s economy.

As the crypto market experienced rapid growth last year, with a promising outlook heading into 2025, many young Iranians have turned to cryptocurrencies as a potential financial lifeline in a constrained economic environment. However, the abrupt decision to halt rial transactions represents a substantial blow to this burgeoning community and reflects the government’s struggle to manage economic dysfunction.

Central Bank’s New Mandate

Following the ban, the central bank has remained largely silent, failing to provide further clarification or guidance to the public despite requests for comment. In a brief public statement, CBI Governor Mohammad Reza Farzin highlighted that the central bank had been granted full authority to oversee and regulate the cryptocurrency market. President Masoud Pezeshkian subsequently emphasized in a letter that the CBI is the "sole trustee to manage" this sector.

The central bank’s latest activities suggest a dual approach: while attempting to clamp down on currency depreciation through stringent regulations, authorities are also exploring ways to bolster cryptocurrency exports. Despite these aims, the specifics of how this will be achieved remain unclear.

Regulatory Measures and Restrictions

In the wake of the restrictions, the CBI has begun negotiating with online exchanges, many of which are now required to comply with new operational demands, including providing proof of reserves and enabling extensive access to user information. Some smaller exchanges have had limited rial payment systems reinstated but face ongoing negotiations over compliance with CBI regulations.

Among the proposed measures is the imposition of daily caps on the fluctuations of cryptocurrency values in rials. If a cryptocurrency’s rial-pricing exceeds a specified threshold—specifically a surge of more than 4 percent for the dollar-pegged stablecoin Tether (USDT)—future trading would be temporarily suspended.

Growing Discontent and Criticism

The banking system faces growing criticism for its role in the ongoing currency crisis. Economists and local exchange executives argue that the government’s approach is causing more harm than good, pushing citizens towards underground markets for cryptocurrency transactions. Eisa Keshavarz, CEO of the local exchange Ubitex, criticized the CBI’s actions as lacking empathy and rationality, suggesting that they reflect a disconnect between the government and the people.

Keshavarz warned that the central bank’s restrictive measures could lead to a rise in unofficial and potentially risky activities as individuals seek ways to protect their financial interests amid an unstable economy.

The Future of Cryptocurrency Regulation in Iran

Despite previous efforts to regulate the cryptocurrency landscape—most of which have been met with confusion or resistance—the CBI and other governmental institutions seem poised to tighten their grip on the market further. Recently, the Ministry of Culture and Islamic Guidance prohibited local media from advertising cryptocurrencies, claiming it is a move to protect citizens from the risks associated with digital currencies.

Moreover, observers speculate that the Iranian government may soon pursue taxing cryptocurrency transactions as it grapples with a widening budget deficit. A recent regulatory roadmap issued by the Supreme Council of Cyberspace hinted at utilizing cryptocurrencies to facilitate international trade, a strategy that could draw scrutiny, especially given the historical context of sanctions imposed after Donald Trump’s presidency.

As Iran navigates its complex economic landscape, the future of cryptocurrency regulations remains uncertain. The authorities’ commitment to “minimizing risks” suggests a likelihood of increased restrictions, potentially prioritizing state interests over individual financial autonomy. As the Iranian rial continues to falter, the implications for citizens involved in the cryptocurrency sector could prove significant.