Due to US sanctions imposed against Iran, the Society for Worldwide Interbank Financial Telecommunication (SWIFT) has removed the nation from its SWIFT messaging system. SWIFT messaging is the protocol used between banks to send transactions, and without SWIFT, Iranian finance is devastated. The SWIFT messaging protocol facilitates transactions between 11,000 financial institutions in over 200 countries. Over 70 Iranian financial institutions have been sanctioned. With no other option, Iran is forced to adopt previous plans to launch their own state-backed cryptocurrency.
Continued US aggression
The US Secretary of State, Mike Pompeo, issued a threat to SWIFT, saying that the service provider would face heavy penalties if it refused to remove Iran. SWIFT did not have to buckle under this pressure as a neutral entity. The updated blocking statute on the Joint Comprehensive Plan of Action (JCPOA) was established for the sole purpose of protecting European entities against US sanctions for assisting Iran. SWIFT will now most likely face penalties under European law. According to the European External Action Service –
“The Blocking Statute allows EU operators to recover damages arising from US extraterritorial sanctions from the persons causing them and nullifies the effect in the EU of any foreign court rulings based on them. It also forbids EU persons from complying with those sanctions, unless exceptionally authorised to do so by the Commission in case non-compliance seriously damages their interests or the interests of the Union.”
Removed from SWIFT messaging, Iran has no other option as it cannot conduct banking services outside of its shores, and must turn to cryptocurrency. European leaders are trying to establish an alternative means of payment for Iran, but a solution is going to take several months at least. The Iranian cryptocurrency has been designed by the Informatics Services Corporation and currently awaits central bank approval, who will issue the new token. The token is still in the experimental stage and will be issued to commercial banks first.
Banking system facilitating its own demise
The lines are becoming more and more distinct as the financial system collapses further. US sanctions were first implemented against Venezuela, crippling the economy, and the country has responded with its own cryptocurrency (The Bank of England has recently denied Venezuela access to its own gold reserves). US sanctions were aimed at Turkey, and bitcoin adoption soared. And US sanctions aimed at Iran have now resulted in a state-backed cryptocurrency being issued. Centralized banking systems, with their homes most notably in the USA and UK, are lashing out. And the result can only serve to promote cryptocurrency adoption.
However, to frame it as a “win” for cryptocurrency is still a little misleading. Turkey, Venezuela, and Iran are not advanced countries, and it is going to take years for the population to get familiar with the technology. In the meantime, there will likely be mass unemployment, food shortages, and little or no public facilities. In a geopolitical battle between the EU and the US, poorer countries such as Iran frequently endure the fallout.
It is also important to understand that these types of power struggles are multidimensional. Financial elites in various continents via for control domestically and internationally, while centralized cryptocurrencies such as Ripple plan to remove SWIFT entirely. Each group has its own agenda, which is why it is so critical that decentralized cryptocurrencies proliferate as much as possible. Otherwise, it will be one control mechanism for another.
Digital Nomad with an interest in Zen and Blockchain technology.
Law graduate with 3 years experience as a consultant in the capital markets industry and 4 years experience freelancing on UpWork as a Creative Writer.