With real-world problems sparking a "death spiral" for the rial currency, Iran's government is turning toward the cyberworld to help skirt U.S. sanctions that will further tighten the economic screws on Tehran.
The U.S. measures that took effect on August 7, four months after U.S. President Donald Trump pulled out of the Iran nuclear accord, are aimed at cutting off Tehran's access to U.S. dollars and stifling trade in key Iranian industries, including cars, aircraft, and Persian carpets.
Sporadic street protests against Iran's economic woes have put a human face on those and other challenges facing that country's religious leadership.
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So with currency and economic fears among the general populace becoming more palpable by the day, the Iranian government has tried to stifle the anger triggered by the White House’s decision to leave the 2015 nuclear agreement by fighting to stem the rial’s drop.
The creation of a cryptocurrency may be one way to ease the pain.
The underlying blockchain technology used in digital currencies eliminates the need for a third party, thus allowing for transactions to be made quickly, irrevocably, and in a secure environment.
Abolhassan Firouzabadi, secretary of Iran's Supreme Council of Cyberspace, said last week that a working group would be formed to discuss the launch of a virtual currency and that "we are also planning to come up with a national and joint cryptocurrency for economic transactions with friendly countries."
The statement came just days after Alireza Daliri, deputy for management and investment at the Directorate for Scientific and Technological Affairs, said a digital currency "would facilitate the transfer of money [to and from] anywhere in the world. Besides, it can help us at the time of sanctions."
Government U-Turn
Talk of a cryptocurrency is a stark about-face by the government, which had previously come out against public cryptocurrencies such as Bitcoin. In April, banks were banned from dealing with them altogether.
Authorities have yet to release any technical details, such as how to integrate blockchain technology with the central bank, though they have said it could be just a matter of months before a rollout to local commercial banks.
How the currency is set up will be an important factor in its possible success, according to Steve Hanke, a professor of applied economics at The Johns Hopkins University in Baltimore, Maryland, and one of the world’s leading experts on hyperinflation.
"It would not be difficult for Iran to launch a cryptocurrency. The question is whether it would be successful or not," he told RFE/RL, noting if it was fully backed by gold under a currency-board system, it could be a "success."
"As long as the international community accepted the new cryptocurrency as something of value, it would face no sanctions problems. And if it was a gold-backed cryptocurrency, it would be accepted by the international community," Hanke, also director of the joint Troubled Currencies project with the CATO Institute, added.
Other analysts say Iran could follow in the steps of Venezuela, which in February launched the digital Petro -- raising $735 million so far for a currency that is backed by oil and is aimed at helping overcome sanctions from the European Union and the United States.
In the days leading up to the August 7 implementation of the U.S. sanctions, the rial weakened to an all-time low of 112,000 to the dollar on the black market, compared with the central bank's official rate of about 44,000 per dollar.
The drop, more than what it lost during the whole period of nuclear sanctions from 2012 to 2016, sparked worries among Iranians that their struggling economy will only worsen under the sanctions, further damaging the rial.
'Millions Are Panicking'
Since withdrawing from the agreement, Trump has fanned the flames by saying in a tweet that the U.S. won’t tolerate Iran’s "demented words of violence & death" when responding to a warning that Iran’s leadership made to the U.S. president.
But even before the pullout, Trump’s saber-rattling had already prompted Iranians to seek safer places for their cash.
In the first five months of the year, Iranians acquired more than $2.5 billion worth of cryptocurrencies, according to local media reports.
Juan Villaverde, an analyst at Weiss Cryptocurrency Ratings, said a cryptocurrency appeals to those in countries lacking financial stability because their money stays out of the reach of the authorities who often implement financial controls that often results in devalued currencies.
"Millions of Iranians are panicking," according to Villaverde.
"They fear not only renewed sanctions but also economic collapse and financial repression. Many are desperately looking for any viable way to leave the country. Many more are scrambling to find safe refuge for the little money they have left," he added.