Cryptocurrencies are being looked at by Iran, Russia and other sanctioned countries as a way to escape punitive barriers to international trade — but “crypto’s” reliance on banking systems makes it a safe haven for illicit payments.
Crypto enjoys an “anonymous” reputation and is seen as a panacea by Moscow and Tehran as they seek a way around international sanctions and the global banking system.
But experts say there is always room for rogue cryptocurrency exchanges that may be willing to trade with sanctioned people and entities, or for sanctioned governments to set up virtual currencies themselves, as international trade still relies on trust and payments that can be converted into safe currencies. Euro and US Dollar.
This means that crypto transactions are being processed like any other international banking system, and the risk of being caught violating compliance regulations is high.
“Crypto has a bad reputation because it was originally very popular with criminals,” said Peter Piattsky, a former US Treasury official who now heads the Castellum AI consultancy. But the funny part is that crypto is more intuitive than traditional finance.
Iran Open Challenge
The issue of using cryptocurrencies to evade sanctions drew attention earlier this month when a senior Iranian business official revealed that Tehran had for the first time used an anonymous cryptocurrency to pay a $10 million import bill to an unidentified business partner.
Alireza Payman-Pac, Deputy Minister of Trade and Industry, on Twitter on August 9 He promised. At the end of September, he wrote that “there will be more transactions in foreign trade with countries where cryptocurrencies are used”.
The announcement was seen as a message from Tehran that it has found a way to use SWIFT — the world’s largest bank transfer system — to circumvent international sanctions that have for decades crippled Iran’s ability to import weapons and foreign technology. .
International concerns over Iran’s controversial nuclear program have further isolated Tehran from the international trade market, with new sanctions imposed by the United Nations and the United States.
Seeking an end, Iran has sought ways to make transactions inaccessible or essentially sanctions-proof, such as trade with willing states that regulators cannot do anything about.
In the year Trade partner Russia — itself subject to tough international sanctions over its annexation and annexation of Ukraine’s Crimean peninsula in 2014 and tougher sanctions since its full-scale invasion of Ukraine in February — has also shown interest in crypto. As a way to overcome trade barriers.
But when virtual currencies have a long track record of being monitored by regulators and regulators, Piattsky questions why anyone would use them to conduct business with restricted jurisdictions.
“Who in their right mind would be willing to pay for crypto in Iran? Pyattsky asks. “Even in the criminal world, people want to be paid. [a currency] This is worth it. And if you are paid in crypto from a sanctioned party, you run a high risk of losing your money.
What’s in your virtual bag?
A traditional bank in some ways offers better protection from regulators because money is sent from account to account, leaving little visibility of where the money ultimately goes.
With cryptocurrencies, it’s the opposite, Piattsky says.
“The biggest difference between crypto and traditional forms of finance is the presence of this tracking system,” he said. “With crypto, if you know someone’s wallet number, you can see how much money they have in it. You can also see who they sent money to and where they received money from.”
As long as there is more than one currency in the world, a U.S.-based sanctions expert told RFE/RL, there is a possibility of trade involving, for example, the Russian ruble or the Iranian rial. But for that to happen, all parties concerned are not exchanging goods for more secure currencies, and the transaction may be a worthless digital file.
Even if Iran makes a $10 million transaction this month, Piatsky said he suspects it may not be the types of foreign technology Iran wants.
Payman-Pak tweeted: “If this is a government announcement, is this what the government wants?”
“Are you buying a plane? Are you buying a ship? Is there a shipbroker somewhere willing to accept crypto? I don’t know,” Piatsky said. But announcing a $10 million transaction is one thing, and another [pull it off]. And of course, to be precise, it means it closes immediately. “
Efforts to control
International regulators, bodies and Western countries are well aware that cryptocurrencies can be used for illicit trade.
In March, the European Union – strengthening the sanctions imposed on Russia due to the war in Ukraine – adopted a new law regarding the use of cryptocurrencies in illegal trade, and in June, to ensure the detection and identification of crypto-assets in order to protect money. Human trafficking, terrorist financing and other crimes.
And the US Treasury Department has taken measures to prevent illegal use of cryptocurrencies, including ransomware payments.
US-based crypto exchange Kraken is reportedly under federal investigation for allegedly violating sanctions by allowing users to trade virtual currencies in Iran.
Tornado Cash, a “crypto mixer” that allows its users to remain anonymous while transferring crypto assets, was added to the US Treasury’s list of sanctioned firms this month. Tornado Cash has been accused in the US of laundering more than $7 billion in virtual currency, including money stolen from a North Korean state-backed database group.
Within days of the announcement, Dutch authorities on August 10 announced the arrest of a developer suspected of contributing code to the open-source Ethereum blockchain-based platform.
And in March, the US-based cryptocurrency exchange Coinbase, in response to requests from the US government to ensure that platforms cannot be used to evade crypto sanctions, announced that it had suspended 25,000 cryptocurrency wallet addresses “engaging in illegal activities related to Russian individuals or entities”.
“Regulatory efforts are focused on the foundation: ‘We regulate the exchanges,'” Piattsky explained. “The exchanges are basically like banks. And we’re going to make sure the government gets the money transfers and the money transfers are compliant, so they can stop transactions going to bad actors.”
Russia and Iran have surprisingly banned the use of cryptocurrencies in their countries, citing concerns that it could be used to fund illegal activities.
But Ivan Chebeskov, head of the Russian Finance Ministry’s financial policy department, said in May that “the idea of using digital currencies for international settlement transactions is being actively discussed” and that crypto could help counter the impact of Western sanctions.
Although Iran has officially banned cryptocurrencies domestically because they “fund money laundering and terrorism,” the head of the parliament’s economic commission, Mohammad Reza Pour Ebrahimi, earlier this year lawmakers considered “bans and foreign exchange restrictions” and the country’s international trade. Seeing crypto as a way to help you run.
Officials, meanwhile, have clearly confirmed crypto mining on Iranian soil as a way around the sanctions.
But that doesn’t mean cryptocurrency can be used for commercial purposes, or that it’s possible to create a group of trading partners willing to develop their own digital currencies, sanctions experts say.
The development of digital currencies based on a country’s fiat currency still requires Moscow and Tehran to be technologically protected and confident in their own value.
Castellum.AI’s Piatetsky has doubts about how many allies Iran or Russia can get.
“Can Russia create some ecosystem where there is Putin’s coin and Iran’s coin, and they only do business with each other? Sure, but it would be really much better to fill airplanes with gold and fly them back and forth. “Pyattsky. he said.
He’s like a guy who says, “Okay, I’m going to make a better club.” “Okay, do it. If no one wants to be in your club because your product is terrible, let’s see who gets in.”