The concept of central bank-issued digital currencies or national cryptocurrencies has attracted many governments across the world. Particularly, governments that have been sanctioned by the U.S. — such as Iran.
Iran is known for implementing the most creative barter-style sanctions evasion schemes in modern history involving various countries called “gas-for-gold” or the “gold loophole” to evade the economic restrictions that cut the country out of the financial system, crippling their ability to trade with the world.
Recently, with international payment intermediaries such as the SWIFT system barred from operating in Iran, it launched a new barter-style international payment gateway called “Instrument in Support of Trade Exchanges” (INSTEX), with France, Germany and United Kingdom (UK) to broker Iranian imports in and European exports out. And also issued a national, gold-backed cryptocurrency called “Peyman” — which means covenant, oath or promise in Persian. Peyman — will be hosted on a Shariah compliant blockchain platform developed as a “SWIFT Counterpart” in coordination with Armenia and Russia.
Four Iranian banks — Bank Mellat, Bank Melli Iran, Bank Pasargad and Parsian Bank — have partnered with blockchain startup Kuknos Company to tokenize $1 billion of bank assets in order to facilitate cross-border transactions with Austria, Bosnia, France, Germany, Russia, South Africa, Switzerland and the UK.
When the first phase of the Peyman international payment system is operational, only institutions such as commercial banks will be allowed access. When the second phase is operational, individuals will be allowed to use Peyman.
Iran Fara Bourse, an over-the-counter exchange, is expected to host the initial coin offering of Peyman, which will be similar to the launch of the oil-backed national cryptocurrency Petro by Venezuela.
The blockchain-based Peyman international payment system launch announcement comes shortly after Iran amended its AML/CFT laws to bring them into line with FATF standards. And the country’s central bank issued first of its kind draft cryptocurrency regulations. These regulations reversed an earlier cryptocurrency ban and authorized initial coin offerings, tokens, cryptocurrency wallets, cryptocurrency exchange bureaus and mining.
Despite Iran’s first of its kind cryptocurrency and AML/CFT regulatory initiatives, it should be noted that under U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) issued cryptocurrency guidance, U.S. persons have the same sanctions compliance obligations regardless of whether transactions involve fiat currencies or cryptocurrencies. Sanctions violations involving cryptocurrencies are expected to result in enforcement actions that are similar to those imposed on persons that use fiat currencies. Therefore all U.S. persons are required to comply with OFAC regulations, block the property (including goods, contracts, and funds of any form) of sanctioned persons and make timely reports to OFAC. Failure to do so may result in significant civil and criminal penalties.
A number of global cryptocurrency exchanges have already dropped Iran from the list of supported countries to receive services.
Selva Ozelli, Esq., CPA, pictured above, is an international tax attorney and CPA who frequently writes about tax, legal and accounting issues for Tax Notes, Bloomberg BNA and the OECD.