Circuiting US sanctions on Iran by payment in Bitcoin

Following the USA rescinding its Atomic Treaty with Iran last year, the country has imposed a very tough blockade on trade with the Islamic Republic, and any European bank, for example, found to have been involved in breaching them could face billion-dollar fines. However, with the secrecy crypto-currencies offer in making financial transactions, paying or receiving funds through bitcoin, for example, could be one way of avoiding any such consequences.

It is since the imposition of sanctions that normal financial transactions using conventional means of payment relating to trade with Iran have come to a halt. And prior to the development of crypto-currencies, anyone wanting to engage in trade with Persia would have had to engage the services of a money smuggler.

However, as Lorenz Honneger, the journalist who wrote this article for the economics section of the Zuger Zeitung mentioned, necessity is the mother of invention, pointing out that the Iranian Central Bank has, for the past few months, been looking at a new strategy, that of allowing payment transactions between Iranian and foreign companies to make use of crypto currencies, as the USA would have no means of monitoring them, the blockchain technology involved meaning that payment would be direct, with no bank involved. Indeed, at present Switzerland is waiting patiently for Iran to set out the necessary legal framework for this. As Simon Fendel, the chairman of the Swiss Iranian Chamber of Commerce, said, “We are expecting the first such transactions to take place within the next three months.”

Fendel went on to give an example of how such transactions could go ahead, citing the sale of a Swiss-made item of waste-water treatment equipment as an example, mentioning how the Iranian customer would first have to register online, agree on a price with his Swiss supplier, choose an appropriate crypto currency and pay in this way, American authorities remaining totally oblivious.

Fundel also said he was aware of many fin-tech start-up companies champing at the bit to take advantage of such financial transfers between Iran and Switzerland, though at present they prefer to remain anonymous.

Philippe Welti, who was Swiss ambassador to Iran between 2004 and 2008, is also following developments in this area very closely, mentioning that there was great interest in being able to pay in this way in Iran.  “Digital currencies offer a real alternative to payment by conventional means through the banking system, especially for low six-digit amounts,” he said.

However, it is already known the USA put two Iranian-held bitcoin accounts on a list of sanctions last autumn. As reported on Swiss TV only in the past few days, the Confederation is cooperating with the US authorities to set up channel of payment between here and Iran to enable humanitarian goods such as foodstuffs, medical equipment and pharmaceutical products to continue to be sent to Iran. In this latter mentioned sector, products made by both Novartis and Roche were mentioned. Welte thought it was clear the Americans were allowing this as they did not wish the world to see, for example, Iranian children suffering on account of their policies. Not that payment for the latter named products would be made via crypto currencies, but through central banks.

Of note is that the Swiss Business Middle East Hub, headquartered in Dubai, which represents primarily small and medium-sized businesses here and in Liechtenstein wanting to do business in the Gulf states, also has offices in Riyad (Saudi Arabia), Doha (Qatar) and Teheran (Iran).