Iran has long used cryptocurrency to circumvent international payment restrictions. Now, Iran plans to increase the use of cryptocurrency to a new sector: the military.
This initiative has reportedly been in development for the past year. With it, Iran has the potential to become the first country to express its desire to use cryptocurrency for weapons transactions.
Iran’s Ministry of Defense Export Center, also known as Mindex, has officially allowed foreign buyers to pay for military equipment using cryptocurrency.
Thus, cryptocurrency can be used to purchase various military hardware, including missiles, drones, rockets, and small arms.
Mindex has allegedly established relationships with clients in 35 countries. However, no governments or entities have been named.
Iran's decision to accept cryptocurrency for weapons transactions arises amid economic pressure on the country. The rial currency has lost roughly 50% of its value, while access to traditional banking channels continues to be restricted due to sanctions from the United States and European countries.
Payment systems related to SWIFT and enforcement agencies restrict Iranian exporters from obtaining funds without facing scrutiny or even the possibility of assets being frozen.
This is where cryptocurrency becomes an alternative. Digital coins, such as Bitcoin and USDT, can transfer their value across countries without relying on traditional third parties. Thus, the risk of block transactions is much lower.
This makes cryptocurrency an attractive option for sanctioned countries to carry out international transactions.
Analysts warn of the risks of using cryptocurrency for weapons payments. This could prompt government bodies to increase sanctions and monitoring of crypto flows to sanctioned jurisdictions.
In this scenario, authorities could decide to identify and blacklist blockchain addresses associated with sanctioned entities. Sanctions may potentially extend to cryptocurrency wallets or third parties involved with exporters.
CEX (Centralized Exchange) may also face pressure to improve geofencing and tighten regulations.
Overall, Iran's decision reminds the market and analysts of the ongoing debate regarding the limitations of cryptocurrency oversight.
Regulations in various countries must also be continuously updated to keep up with the rapid evolution of cryptocurrency as a relatively new payment alternative.
In Indonesia, cryptocurrency cannot currently be used to purchase state weapons. This is because crypto is not yet recognized as a legal payment system. Learn about crypto regulations in Indonesia in the article Crypto in Indonesia: Potential, Regulations, and The Future of Digital Assets.
