USD’s Impact on the Bitcoin & Remittance Industries in Iran
January 25th, 2017 - Posted by Adel Shahin
The American dollar is one of the major currencies in the global economy. Notably, a significant number of product prices are set using the US Dollar. Some countries use the US Dollar as their own currency within their respective national economies, among them is Iran. However, due to the travel ban issued by the Trump administration on Iran, the country has stated that it will no longer use the US Dollar in any financial transactions or financial reporting. So, what does the non-utilization of the American Dollar in Iran portend for that country’s Bitcoin industry?
Briefly explained, Bitcoin is a form of cryptocurrency as well as payment service which utilises online payment platforms to pay for the purchase of products. To use Bitcoins, an individual has to buy them from an online dealer. The value of the currency used has a direct relationship with the number of Bitcoins that can be purchased. In this case, Iran uses the US Dollar and the Iranian Rial. Today, one Bitcoin is equal to 33,456,972.85 Iranian Rials. On the other hand, one Bitcoin is equivalent to 1,036.29 US Dollars. Hence, for any merchant wishing to transact with Bitcoins, it would be economical to buy them using the American Dollar.
If the Iranian government goes ahead with its intention of not using the American Dollar within the boundaries of Iran, the merchants using Bitcoins in Iran would be amongst the worst affected. Notably, no other currency in Iran comes close to matching the value of the US Dollar. If a merchant wanted to buy a single Bitcoin, the merchant would have to part with approximately 33.5 million Iranian Rials which are not easily available. This would present a difficult situation for the merchant (or any party interested in Bitcoins). As a result, the merchant may decide not to use the Bitcoin exchanges found in Iran (such as WMIRAN) and use another country’s Bitcoin exchange and currency. This would push back the development made in the Bitcoin industry.
Apart from the difficulty in exchanging currency for Bitcoins, the refusal to use the American Dollar would affect the average citizen who uses Bitcoins. Like in other countries, Bitcoins in Iran are used as safe and secure means of storing financial wealth. In some countries, workers are paid using Bitcoins. Most people are comfortable in using Bitcoins to represent the cash that they possess.Since the financial reporting in Iran is done in American Dollars, it would not be a surprise that a significant amount of people have used Bitcoins to save their money. Nonetheless, if the plan to exclude the American Dollar in the Iranian economy is affected, it would mean that people would find it difficult to sell their Bitcoins for the Iranian Rial. Since one US Dollar is equivalent to 32,366 Iranian Rials, one Bitcoin would bring into the economy approximately 32.2 million Iranian Rials. Consequently, there would be high liquidity in the economy; hence, the Iranian Rial would significantly depreciate against all major currencies.
Since the financial reporting in Iran is in American Dollars, it would not be a surprise that a significant amount of people have used Bitcoins to save their money. If the plan to exclude the American Dollar in the Iranian economy is affected, it would mean that people would find it difficult to sell their Bitcoins for the Iranian Rial. Since one US Dollar is equivalent to ~32,285 Iranian Rials, one Bitcoin would bring into the economy approximately 33.5 million Iranian Rials. There would be high liquidity in the economy; the Iranian Rial would significantly depreciate against all major currencies.
All in all, the decision not to use the American Dollar rests with the Iranian government. However, by not using the American Dollar, the Bitcoin industry in Iran would suffer. Existing people who use Bitcoins for personal or business activities would also be adversely affected. The decision not to use the American Dollar should be made with these considerations in mind.
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