Rising inflation, sanctions, and bank troubles are making life harder for Iranians.
The decline of the Iranian currency against the dollar has prompted protests in the capital, with demonstrators rallying against the central bank’s policies. Nonetheless, Bitwise’s CEO, Hunter Horsley, says that despite the intricate nature of Iran’s economic meltdown, Bitcoin could provide people everywhere with protection from devaluing currencies.
He commented, “Economic mismanagement — The story of the past, present, and future. Bitcoin is a new way for people to protect themselves.”
Iran’s inflation has surged over 40% since last year
Since the June war with Israel, the rial in Iran has lost more than 40%, with the official exchange rate sitting at an estimated 1.4 million per US dollar. A rate well beyond the official level of the early 1980s was at 70 rials per dollar, according to Alex Gladstein, Chief Strategy Officer at the Bitcoin-focused Human Rights Foundation.
The currency’s decline is only adding to the challenges confronting President Masoud Pezeshkian and the nation’s top leaders. US sanctions curtailing oil income have only intensified the currency’s fall, and the nation’s inflation rate rose to 42.2% year-on-year in December. Moreover, gold coins, a popular hedge against inflation for Iranian households, reached an all-time high of 1.7 billion rials.
Protests in central Tehran began on Sunday, particularly among electronics retailers, before merchants in the city’s Grand Bazaar joined the fray on Monday. State TV covered the protests, reporting that the demonstrators were demanding the stabilization of foreign currency prices. Mohammad Reza Farzin, the governor of the Central Bank of Iran, also stepped down amid the protests, a move that deepened uncertainty about the country’s fate.
Sigel says the government restricted Bitcoin mining at a critical time
Crypto trading is permitted in Iran; however, self-custody regulations remain vague, and the government has taken steps to discourage people from engaging in Bitcoin mining, according to VanEck’s Matthew Sigel.
He argued that the country stepped up enforcement against unregistered Bitcoin mining at the worst possible moment as people rushed to protect their wealth.
Ideally, Iran’s tight Bitcoin mining rules have limited locals’ ability to exploit cheap power, which could enable mining Bitcoin for around $1,300 per coin as of October, far below the current price of $87,600.
Overall, Iranians remain under economic strain as sanctions isolate the country from international markets, a situation exacerbated by Bank Melli’s bankruptcy in October, which put millions of accounts at risk. In February, Iran’s central bank also cautioned that eight additional domestic banks could face dissolution if they fail to carry out reforms. Not to mention, the state’s crypto exchange Nobitex was hacked for $81 million in June, with Iranian crypto flows falling 11% by the following month during renewed conflict with Israel.
Faced with rising inflation, many Iranians, however, have been left uncertain about when relief will arrive, as the prices of staples such as chicken, dairy products, and beans have soared amid cooking oil shortages. Sheyda, a pensioner, railed: “They pay us in currency [rials] that literally turn to ash as you attempt to purchase basic goods. Shopkeepers say everything now is priced in dollars, even milk, and prices go up almost every day.” Authorities have already loosened some social restrictions, like dress codes for women, in addition to extending food assistance to lower-income households. The government will introduce new subsidies next year to assist workers who survive on roughly $100 a month.
However, former US Secretary of State has accused the Iranian government of corruption, blaming it for the deteriorating economy. He noted, “The people of Iran deserve a representative government that serves their interests – not those of the mullahs and their cronies.”
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