"All individuals, exchanges, business entities and/or 'rogue regimes' determined to be transacting with any 'sovereign cryptocurrency' successfully deployed by Iran."
Republicans never miss a chance to burnish their national security credentials, especially in a world of shifting geopolitics and tectonically-moving financial plates.
This week, Senator Ted Cruz (R-TX) and Congressman Mike Gallagher (R-WI) co-sponsored a renewed sanctions bill against the Iranian regime. The bill is aptly named the "Blocking Iranian Illicit Finance Act" (H.R. 7321).
Iran has been under economy-crushing sanctions since the early 2000s, but was given relief in 2015 when the Joint Comprehensive Plan of Action (JCPOA), known as the Iran Nuclear Deal, took effect. The deal was designed to bring Iran back into the fold of the liberal international order (LIO) by trading off de-escalation of Iranian nuclear efforts in return for unfreezing of assets and reconnection to the global financial system.
Since President Trump recused the U.S. from the deal, the rest of the signatories – China, France, Germany, Russia, the U.K., and the European Union – have been working to keep the deal alive.
Unique to a sanctions bill of this kind has been the focus on cryptocurrencies. The entire third section of H.R. 7321 is dedicated to proscribing sanctions against digital assets. Specifically:
Iran has publicly stated its intent to develop a sovereign cryptocurrency to bypass U.S. sanctions, though its debut has yet to occur. A common argument against sanctions has always been the potential for actors to subvert the U.S. dollar, but only recently has cryptocurrency been the putative tool of such a move.
The bill also throws shade at the usual suspects of the LIO – China, the Russian Federation, Venezuela, and Turkey – who it says have the potential to be willing cooperators to Iranian crypto aspirations.
Senator Cruz and his cohorts are obviously looking to get ahead of a potential repeat of the petro experience in Venezuela. The Bolivarian regime, after being blackballed from the international financial system, has been working towards a sovereign cryptocurrency which it claims will be backed by oil.
Iran has been a thorn in the side of the Middle East and the broader Western world as it has continued to destabilize the region and flout international norms.
Blatantly missing from the Iran Nuclear Deal were terms arresting the growth of these destabilization methods and instead a monomaniacal focus on nuclear deterrent. This has been the argument being pushed by detractors of the deal. It just doesn’t go far enough.
Due to U.S. withdrawal, firms around the world have been hestitant to deploy capital to Iran or to be seen doing business there – a once green pasture that promised bounty for anyone willing to move into the Shia-dominated country.
In November, SWIFT, the world’s foremost payment transmission system, which underlies the entire financial network, announced it was cutting off certain Iranian banks. Many believe it was influenced by SWIFT’s desire to comply with future U.S. sanctions.
Without the ability to contract in dollars through SWIFT, Iran has looked towards crypto – a newly-favored tactic for authoritarian governments. If dollars and other reserve currencies are cut off, it makes sense to use a decentralized, non-governmental asset such as crypto.
The proverbial thorn in the side of the West, Russia immediately announced on the back of the SWIFT decision that its Russian Association of Cryptoindustry and Blockchain (RACIB) had signed a cooperative agreement with Iran’s Blockchain Lab to create a "supranational" SWIFT counterpart to undermine sanctions.
Every new technology has its dark side.