Bitcoin can be used by Iran as a tool to partially combat the dramatic situation it finds itself in.
Is the verdict for Iran a “classic spiral of death”?
This Islamic Republic in the Persian (Arab) Gulf zone, has three main issues:
- U.S. dollar.
Actually, the country’s health emergency has now reached a dramatic level, with a veritable explosion of infections and deaths since October.
According to the Iranian Ministry of health, the number of daily Covid-19 cases has more than quadrupled in the past two months, which has not only worsened the health crisis, but also led to an economic collapse.
Added to this is the continued loss of purchasing power of the local paper currency, the Iranian Rial, which continues to decline sharply.
According to Johns Hopkins University Professor of applied Economics, Steve H. According to the expert on hyperinflation, the situation in Iran from this point of view will now be a “classic death spiral”, given that since the beginning of the year, the Rial has depreciated by 54% against the US dollar, while the annual inflation rate has increased from 22% to 158%.
Moreover, the Republic has huge problems accessing its dollar reserves, as they have fallen by more than 33% in the past 24 months.
As if that wasn’t enough, international sanctions still make it very difficult to spend dollars, for example, to pay for imported goods.
Cryptocurrency as a salvation
However, the country is rich not only in oil, since in August 2019 it regulated the production of cryptocurrency so much that it somehow stimulated the development of this industry.
A few days ago, a new law required all miners working in the country to sell the extracted cryptocurrencies to the Central Bank, and allowed the Central Bank itself not only to purchase and store cryptocurrencies, but also to use them to pay for imports.
For example, the fact that citizens can mine Bitcoin and then force them to give It to the Central Bank can actually help solve the problems of not being able to get enough dollars to be able to spend it on buying imported goods.
How Bitcoin may help Iran
Using its significant energy sources, it can easily obtain a certain amount of bitcoins, although probably not very large, for free use in international markets. In fact, using BTC can also help circumvent the sanctions imposed by the United States of America.
Thus, also due to the recent appreciation of the BTC exchange rate, the Iranian economy may partially face the significant difficulties it faces when importing, using Bitcoin instead of the US dollar as the currency for international payments.
It is not yet clear whether this is actually the case, but since the Iranian Central Bank purchases BTC on the one hand and is authorized to use it to pay for imports on the other, everything suggests that such a scenario is absolutely plausible.