INSTEX Could Be Used By Iran To Trade Bitcoin and Crypto Assets For Euros
At the beginning of the year, France, Germany, and Britain declared the formulation of a new payment-processing system designed to keep alive the Joint Comprehensive Plan of Action (JCPOA), also known as the Iran deal. The Instrument in Support of Trade Exchanges (INSTEX) is a European-government-controlled Special Purpose Vehicle (SPV), a legal entity created specifically to allow companies based in the European Union.
INSTEX provides an avenue for companies in the EU to do transactions with Iran outside SWIFT and other payment solutions while circumventing US sanctions. Although, INSTEX is still in infancy and the scope of impact still can’t be estimated accurately.
Lisa Ellis, a partner, and financial technology analyst at NYC-based MoffettNathanson LLC said:
“INSTEX is aimed at reducing the number of cross-currency transactions required by matching buy and sell orders in local currency by matching a European exporter to Iran and an importer from Iran and matching their orders so one just pay the other one in Euros and their counterparties in Iran pay each other in Rial.”
NYC-based lawyer Selva Ozelli had earlier said:
“These regulations reversed an earlier crypto-currency ban and authorized initial coin offerings, tokens, crypto-currency wallets, crypto-currency exchange bureaus, and mining. Therefore the Iranian people are free to use Bitcoin as a store of value to evade US sanctions.”
Iran has plans to develop a national digital currency backed by Iran’s gold reserves. Iran plans to mint more than a billion tokens, titled “PayMon” (PMN), which will be issued by four of Iran’s banks and traded on Iran Fara Bourse, an over-the-counter exchange. In an almost immediate response to Tehran’s announcement of the launch of PMN, US’s OFAC added cryptocurrency players to its sanctions blacklist; in an unprecedented move, it also made associated cryptocurrency addresses public.
The Iranian government estimates that its citizens have spent $2.5 billion on cryptocurrencies and possibly as much as ten times that. Although, these numbers do not add up considering the fact that in the first half of 2018, the demand for Gold bars shot up by 200% while the bitcoin volume on LocalBitcoins decreased by roughly 77%. To add to it traders are banned from trading from Local Bitcoins in Iran.
“When too many import orders (are placed) in Europe relative to export orders into Iran, Bitcoin could play a role in direct currency exchanges – central bank to central bank – due to the sanctions. INSTEX in Europe could sell bitcoins to get Euros and its counterparty in Iran would then sell bitcoins to get Rials.”