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How Does Islamic World Threaten American Crypto Stability?

10 August 2018 16:19, UTC
How Does Islamic World Threaten American Crypto Stability?
By Oleg Koldayev, Daniil Danchenko

We already wrote a lot of articles on the topic of the countries in dire economic situations and their efforts to dodge the bullet of the international sanctions while riding the crypto wave. Now it’s Iran’s turn.

Despite certain similarities, they have a bit different situation from Venezuela.

First of all - their economic state is not a country that dire. In fact, for them, cryptocurrency (if it’s ever going to be introduced) isn’t a “straw for the drowning men” and will be fine in its relatively stable economic situation. However this whole situation is not that easy either - crypto has an uncertain status within the system of Islamic banking since it violates two of its main principles: Harar and Nasir.

After all, within the first free months after Mr. Trump announcement, stating that the USA is out and sanctions are going to stay, it was not all that fatal for Iran. Yes, they Iran inflation rate flew up to 13.7%, but it wasn’t that bad. Especially if compare that with Venezuela, where inflation basically made Bolivar, their national currency, pretty much worthless. But it’s not all sunny either - their oil exports to India fell by 16% and despite the fact, that China gets it’s oil “fix” in Iran, they are not planning to move from the 20-30$ bln point. South Korea and Europe are also reducing their demand for Iranian oil.

And the worst part - Iranian goods are quickly losing their competitiveness on the global market, mostly because transactional fees are skyrocketing because of the sanctions. Big banks are also leaving Iran - UBS и Credit Suisse announced that they are leaving the country. HSBC и Standard Chartered are staying, but they are minimizing their presence on the business scene. Chinese are also “wrapping up” in Iran. One of the reasons for that - cheap Iranian oil loses its appeal because of the sanctions.

Potentially, transmissions of the export payments in the crypto are promising, but it’s not going to be that easy. One of the main reasons - Iran is a country, where the Islamic revolution has won and Islam is a part of the country, So their relations with the crypto have strong traces of slight cognitive dissonance.

Mohammad-Javad Azari Jahromi, Minister of Information and Communications Technology confirmed that the conceptual and infrastructural aspects, required for the launching the state crypto, are already in place. That was back in 28 of April, 2 days after Iran has banned all crypto related financial operations on their territory.

At the first look - official Teheran just pushed away from their competition. But why, this was months after the official statement, indicating their readiness? But the answer to this question lies outside of the world of economy.

In the Muslim world - there is no direct ban on crypto. And there is also a principle that states “Everything that is not banned” is allowed. Because of this - because of this, a lot of Arabian countries consider crypto to be halal.

In Islam - the nature of money is simple. Money is something that has a widespread consensus of money behind it. And the Koran also has passages about risk and uncertainty, that state that every righteous Muslim should avoid them. And those things are basically core concepts of crypto. Because of this - acceptance of crypto is not just a question of the economy, but also a deeply ethical question.

But still, what will happen if Islamic republic will step over this boundary? This - out of control crypto market is already being a major thorn in the side of international governments. Ar at least one of them, the USA. American financial regulator is on the fence between losing the regulation tightening it up. At the first point - whole crypto industry itself is not as big as it likes to think, and maintaining it’s “health” is going to cost a lot of money. Second - countries that have always been a pain for them. If Venezuela is somewhat tolerable, Iran is their sworn enemy, back from 1979, when the USA embassy was besieged by the angry locals.

Because of this Iranian coin can trigger a massive effort to take over control over the crypto. No one can promise that digital money won’t be used to fund the nuclear program or some other kind of action that the USA frowns upon. And this will be bad no matter what. In one case - the market is going to lose its main appeal, lack of regulation. As a result - markets will suffer a dramatic drop. In the other scenario - markets will move from the centralized exchanges, which will destroy all the recent progress that was made within the last two years will be lost.

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