Iran's Banks Banned From Crypto

Conor Maloney
  • The central bank has cited concerns that crypto could be used for money laundering
  • The bank has referred to crypto currency as volatile and a "pyramid scheme" in the past. 

Iran's central bank has been outspoken against decentralized cryptocurrencies since February when they rejected  Bitcoin in favour of their own centralized, regulated cryptocurrency.

The bank denied reports that it would be addopting Bitcoin after being cut off from the SWIFT system recently, saying:

The wild fluctuations of the digital currencies along with competitive business activities underway via network marketing and pyramid scheme have made the market of these currencies highly unreliable and risky.

Central Bank of Iran

Today the Central Bank of Iran has taken things a step further by banning all domestic banks and credit institutions from any dealings in cryptocurrency whatsoever, stating that all cryptocurrencies had the capacity to be used for money laundering and terrorism. 

“Banks and credit institutions and currency exchanges should avoid any sale or purchase of these currencies or taking any action to promote them.”

Central Bank of Iran

Iran's national fiat currency is in crisis after the US began sanctioning Iran and presssuring other countries to comply, limiting trade and causing the rial to plummet in value, hitting an all-time low earlier this month. The sanctions may well be renewed in mid May, which will cause even further financial instabiliy in the country.

The financial crisis may be one of the factors in the decision to ban financial institutions from working with crypto outright, although critics of the decision point out that currencies like Bitcoin could be used to alleviate the situation as well.

Services like PayPal and Mastercard are banned in Iran, making cryptocurrency an appealing option, but the recent bank ban will make it more difficult for digital currencies to achieve the same level of adoption being seen in other countries at the moment.

However, the proposed government-backed cryptocurrency may yet provide a solution, with people looking to the Venezuelan Petro token as a measure taken under similar circmstances of sanctions and trade pressures. 

CFTC Chairman: 'Explosion of Interest’ in Crypto Will Lead to More Clearinghouses

The Chairman of the U.S. Commodity Futures Trading Commission (CFTC) has recently revealed the regulator expects to see more firms apply to become federally-related clearinghouses as a consequence of an “explosion of interest” in cryptocurrencies.

Speaking before the U.S. House Agriculture Committee earlier this year, CFTC Chairman J. Christopher Giancarlo revealed, while testifying on the “state of the CFTC” that the clearinghouses the agency regulates are a “critical” point of risk in the “global financial system.”

Per Giancarlo the clearinghouses, which are financial institutions that act as intermediaries to facilitate transactions between two entities, keep growing and becoming more complex. The CFTC examines these to identify any potential issues, a task that is becoming increasingly important “to overall financial stability.”

Currently, the agency regulates a number of registered clearinghouses in the U.S., and six located overseas. The amount of firms it has to regulate is set to grow, Giancarlo noted, thanks to the introduction of cryptocurrency futures.

LedgerX, a cryptocurrency derivatives provider, is notably already a clearinghouse, but platforms like ErisX are waiting for the CFTC to approve their applications to be approved.  Giancarlo stated:

The Commission anticipates new applications for clearinghouse registration resulting from the explosion of interest in cryptocurrencies; an area in which protection of the cryptocurrencies will be one of the highest risks.

The Chairman of the CFTC then addressed the regulator’s fintech research group LabCFTC, which helps it keep track of changing technology. Giancarlo noted that blockchain technology and crypto were important aspects of the “rapidly changing markets,” and added the research group helped the CFTC understand them.

Per his words, LabCFTc helped the regulator “determine the value of technological innovations,” including that of cryptocurrency futures products like those offered by regulated exchanges like the CME and Cboe.

There are various platforms looking to offer physically-settled bitcoin futures contracts, including ErisX, LedgerX, and the Intercontinental Exchange’s venture Bakkt. As covered, Giancarlo has in the past revealed he believes institutional investment will bring maturity to the crypto market.