In the spirit of that, this week’s newsletter dives into Iran’s ostensibly pro-bitcoin strategy and shows how it contravenes the level playing field values on which bitcoin is built.
In the latest stop on our world tour of crypto hot spots, Sheila Warren and I talk to two Nigerian entrepreneurs: Yele Bademosi, the CEO of payments app Bundle Africa, and Adia Sowho, a venture builder and operator.
Meanwhile, the free trade-minded who chafe at all government intervention in markets may view Iran’s use of bitcoin to get around U.S.
You’re reading Money Reimagined, a weekly look at the technological, economic and social events and trends that are redefining our relationship with money and transforming the global financial system.
But look closer and you’ll see in Iran’s bitcoin strategy the hallmarks of an authoritarian system that flouts the freedoms crypto advocates like to embrace.
Concerns about that will be amplified if it’s apparent that China, which is eager to knock the dollar off its international reserve currency perch, is directly or indirectly supporting Iran’s approach.
The question is: How should the Biden administration respond? Let’s hope it avoids the temptation to roll this into a simplistic “bitcoin bad” narrative and imposes tighter controls on the cryptocurrency’s users in the U.S.
That makes it very difficult for Iran to buy what it needs from the world, and ensures that the local currency, the rial, is under perpetual downward pressure, which in turn stokes inflation.
Now, by creating a legal framework in which bitcoin can be mined locally, taxed under a strict licensing system and used by regulated institutions to pay for imports, the government has a workaround.
In January, it said that Iran had 24 officially registered mining farms, consuming 310 megawatts of power, and that the Ministry of Energy had shut down 1,620 illegal bitcoin mining operations with a capacity of 250 megawatts over the prior 18 months.
In 1993, Fidel Castro’s regime was broke.
It later entrenched this system by requiring all incoming foreign currency, including that carried by foreign tourists, be exchanged into “convertible pesos,” a new local currency pegged one-to-one with the dollar.
Everyone else earned near-worthless moneda nacional, which could buy only items listed on the “libreta,” or ration book, an artifact of Soviet communism that guaranteed necessities such as bread and milk but excluded anything deemed to be a “luxury” – in effect, anything imported.
Gas stations would siphon off gasoline intended for domestic customers and deliver it to companies operating in the convertible peso economy.
Every time he saw a policeman up ahead, he urged me to dismount and walk to meet him two blocks down the road because he couldn’t be seen to be servicing dollar-wielding foreign tourists.
Such was the intoxicating appeal of this unjust system for the Castro dictatorship – first under Fidel, then under his brother, Raul.
Similar inequity lies ahead for Iran if it sticks with its crypto strategy and, as many of us believe, bitcoin becomes a sought-after store of value in a post-COVID era of high debt, slow growth and fiat currency depreciation.
Still, for the Iranian regime, the strategy is a tempting way to fund itself.
China has the largest bitcoin mining industry in the world, and so it’s not hard to imagine Chinese bitcoin miners building officially endorsed, fossil fuel-run facilities inside Iran.
My fear is the rallying cry in Congress will be that bitcoin is “enabling” reprehensible sanctions-busting behavior, prompting calls for tougher crypto regulations.
It could offer to work with domestic bitcoin miners to commit to zero greenhouse emissions and, in so doing, develop such energy sources, whether it’s the government’s nuclear plants or locally run solar and wind operations.
As I wrote in a prior newsletter, I see a pathway for government incentives to make bitcoin mining a catalyst for green energy development.
As expected, sales of crypto art grew rapidly during the quarter as a mania for non-fungible tokens took hold.
Why? In one word: Beeple.
Bitcoin’s price did not immediately jump after the tweet, but for the 36-hour period , it brushed with its highest level for the week.
The last thing you want to do as a respected news outlet with a large megaphone is to amplify the rumormonger’s message.
But in the age of social media, and for the purposes of this discussion, it’s a distinction without a difference.
As Milne came under attack, he stood his ground.
Here, two old-school newsroom rules are useful: 1) the problem is not that you start a rumor per se, it’s that you amplify it and in so doing legitimize it, and 2) just putting the label “rumor” on an unsubstantiated claim does not get you off the hook.
With at least three proposals before an SEC that’s now led by crypto-savvy Chairman Gary Gensler, and given the success of three Canadian ETFs, expectations are stronger than ever for a positive ruling.
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