Bitcoin and sanctions--there is an interesting interplay between these two words. The word “sanction” is defined as “an economic or military coercive measure adopted usually by several nations in concert for forcing a nation violating international law to desist or yield.”
Could this statement be applied to the international monetary system? A purported “International Community,” which is referenced as if it were a spontaneously-occurring legitimate broad consensus, but which is actually understood to be the United States compelling nations to adhere to a monetary system that uses US dollar settlement. Who benefits from this arrangement, and at whose expense?
As an Iranian who has observed all kinds of financial crises during the past couple of years, I fully understand what it feels like to lose your currency’s value by 50% overnight. It’s a disaster, and the worst part is when your government strongly resists against these sanctions and you can’t see any bright light at the end of the tunnel. This actually happened during the last sanctions imposed by not only the US, but also the EU in 2012. If we look at it from a financial perspective, this means no Mastercard, no Visa card and even no SWIFT. Iran’s wire to other countries’ financial systems was cut.
There was this panic moment in the country where the Iranian government looked so confident but the demand for USD and gold were increasing in Iran. The price of a US dollar was about 11,000 IRR (Iranian Rial) and it went up to 35,000 IRR within a few months. This was a disaster, especially for companies that had to buy their materials and import products from other countries. The government announced a fixed USD rate, which was way lower than the market rate, and this fixed rate was only allocated to specific businesses. According to Yuval Steinitz, Israel’s former prime minister, Iran would be forced to accept only cash or gold, which is impossible when dealing with billions of dollars.
Apart from the financial perspective of these sanctions, there was also a big humanitarian impact on innocent Iranians. In 2013, The Guardian reported that 85,000 cancer patients required chemotherapy and radiotherapy, which are now scarce. Iranians with serious illnesses have been put at imminent risk by the unintended consequences of international sanctions, which have led to dire shortages of life-saving medicines for cancer and bloodclotting agents for hemophiliacs.
Moreover, the effects of U.S. sanctions include expensive basic goods for Iranian citizens, and an aging and increasingly unsafe civil aircraft fleet. Iranian airlines including Iran Air were not able to purchase equipment, which caused many incidents and deaths during the last couple of years.
The Bitcoin Solution
Although the situation has improved since 2012, people felt the instability and fluctuations of their currency over that period. Some people were blaming the US for putting a lot of pressure on normal people while others were losing faith in the Iranian government.
That was when Bitcoin came in. In fact, when it comes to Bitcoin, one important criterion that many people love and most Bitcoiners adore is the fact that it’s decentralized, which means that it rejects the idea of having one centralized entity imposing an idea over a certain group of people, which in this case is a sanction.
Hearing about a digital currency without any central organization seemed like God’s gift from heaven to Iranians. Some people who were familiar with the hardware industry started mining with their GPUs, and created a fairly small community of “Iran Bitcoiners” by creating an Iranian forum, where they could answer people’s questions and educate them. In fact, some businesses who were completely excluded of the global market found a way to expand to other countries, such as a local handmade Persian shoes business in Isfahan. Small groups of individuals started making exchanges and tried to introduce the amazing features of this service.
Bitcoin in Iran Today
As of this day, Bitcoin is not still something that all Iranians have heard about, but they are spreading it by word of mouth really quickly, since the opportunities that this service can offer are limitless for a closed market like Iran. There is very good communication infrastructure in the country and many people are connected to 4G internet these days. When people realize that instead of paying an extra 10% fee to transfer their money or relying on travel agencies to purchase their flight tickets and hotel rooms, there is a payment system with a really low transaction fee they can have on their mobile phone, it will be like inviting a starving man to a BBQ buffet.
Moreover, the volatility of Bitcoin is totally understandable for the people in Iran. They have used a currency where its value has been almost as unstable as Bitcoin during the last four years, so they are already familiar and know how to handle a currency whose value goes up and down in a minute.
During the last month, I tried to explain this to as many people as possible and got a coffee shop in Tehran to accept Bitcoin. It will hopefully become a Meet Up place next month. There are so many talented individuals, as well as a smart community with great potential; they raised some funds on Lighthouse to cover some expenses. Fortunately, the government has not taken any side about Bitcoin as of this date, and there are no laws or regulations against Bitcoin in Iran yet.
Hopefully with a young and rising startup scene with so many talented educated entrepreneurs in Iran, we are going to see a big cryptocurrency market that can connect the big and isolated Iranian market to the rest of the world.
by Alireza Beikverdi (Cyber security researcher)
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Could this statement be applied to the international monetary system? A purported “International Community,” which is referenced as if it were a spontaneously-occurring legitimate broad consensus, but which is actually understood to be the […]