Hyperinflation drives Bitcoin adoption in Iran
Iranian parliament approves redenomination of the rial as Covid-19 & sanctions take their toll
Iranians are increasingly turning to Bitcoin (BTC) and other cryptocurrencies as the country continues to struggle with rampant hyperinflation.
The number of Iranians using the world’s largest cryptocurrency remains relatively small. However, with the crippling effect of US sanctions on Iran’s economy compounded by the ongoing Covid-19 pandemic, interest has picked up. On some peer-to-peer exchanges, such as LocalBitcoins, Iranians are witnessing premiums on BTC of over 300 per cent.
The official inflation rates declared by the Iranian government have long been disputed. At its peak in September 2018, the Islamic Republic of Iran stated that inflation was just under 17 per cent. In reality it was almost 400 per cent.
After years of parliamentary wrangling, Iranian politicians have now agreed to reconstitute the nation's fiat currency. The new toman will be worth 10,000 rials (£0.19, $0.24, €0.22) a cut of four zeroes.
Indicating the government’s reticence to recognise the severe hyperinflation after years of minimising the reality on the ground, the head of Iran’s central bank, Abdolnaser Hemmati, stated that the measure “has no effect on the inflation rate, because inflation is the consequence here, not the cause.”
In any case, all sides agree that the new currency will save money in printing and minting costs and will also lessen the psychological pressure of steep-looking prices on citizens.
Iran has softened its attitude to digital assets in the past 12 months. In a speech earlier this year, President Hassan Rouhani identified the technology underlying cryptocurrencies as a useful tool to resist “the domination of the United States dollar and the American financial regime.” He urged the creation of a pan-Islamic cryptocurrency.
With such high profile recognition, adoption of cryptocurrencies and associated technologies has increased. The government has given tax breaks to crypto miners if they repatriate all foreign earnings, while earlier this month, Iran’s Ministry of Industry, Mining and Trade approved a plan for the Turkish firm iMiner to build a 6,000-rig crypto mining facility in Semnan, a city in northern Iran.
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