BY Fintan Ng - July 26, 2018
Iran and Venezuela’s crypto plans
Venezuela and Iran, both oil-rich nations brewing with political unrest and economies with uncertain futures, will be launching their own national cryptocurrencies.
Both countries have been sanctioned by the US and while Iran’s economy is recovering, especially in the past two years, there is a risk of growth being hit if the US decides to act more harshly over what US president Donald Trump considered a bad nuclear deal signed in 2015.
Venezuelan president Nicolas Maduro was quoted by Reuters in report dated July 26 as saying in a televised address that a monetary conversion tying the bolivar to a recently launched government-backed cryptocurrency called the petro will start on Aug 20.
He showed the new currency bills but did not offer any details on how the conversion will be done. Venezuela was supposed to start the monetary overhaul in June but held back on the advice of banking officials.
Maduro says the conversion will remove five zeroes from the bolivar rather than the three zeroes originally planned. According to the news wire, inflation is expected to hit 1,000,000% this year, from projections the International Monetary Fund made. It cites the opposition-run National Assembly that says annual inflation topped 46,000% in June.
Venezuela has been in crisis since 2014, following the election of Maduro, who succeeded the late Hugo Chavez, whose political and economic reforms under the “Bolivarian Revolution” brought about the hyperinflation, collapse of the economy and widespread political unrest.
A lack of confidence in Maduro’s leadership together with the mismanagement of the state oil company’s shrinking funds to provide subsidies for his core supporters mean that any monetary reforms, including the adoption of a cryptocurrency will fail, according to economists after the launch of the petro in February.
Reuters says Venezuela’s minimum wage is now the equivalent of about US$1 a month and cash is not easily obtainable due to the hyperinflation, which has been equated to Zimbabwe’s in the 2000s and Weimarian Germany in the 1920s.
Meanwhile, PressTV, an Iranian government-backed media outlet, says the Islamic republic is preparing to develop its own digital currency as a solution to impending US sanctions.
It says the plan is on the agenda of the Directorate for Scientific and Technological Affairs of the Presidential Office and was announced by its deputy for management and investment affairs, Alireza Daliri.
He was quoted by the ISNA news agency as saying that local companies were now working with the Central Bank of Iran to develop the cryptocurrency.
“We are trying to prepare the grounds to use a domestic digital currency in the country,” Daliri told ISNA, adding that the companies were still working on removing pre-launch flaws.
“This currency would facilitate the transfer of money (to and from) anywhere in the world. Besides, it can help us at the time of sanctions”.
PressTV says the impending sanctions include a universal ban on Iran over buying or acquiring US dollars, which will come into force in August as well as restrictions over purchases of crude oil from the country and investing in the country’s oil industry, which will become effective in November.
A cryptocurrency is also now feasible after a national encrypted key based on the blockchain technology was developed, according to Iranian media.
IRNA, the national news agency, says the key would be introduced into the country’s banking system within the next three months after technical glitches are removed.
This encrypted key would be used to support the national currency, the rial, and then used as a token for settling financial transactions by commercial banks, which would then be able to develop smart contracts based on the properties of the tokens and expand their payment services to digital wallets.