Two US lawmakers introduced bills to prevent Iran from being able to grow its planned government issued sovereign initial coin offering, or its own digital currency. Both bills add criminal liability to persons, financial institutions, correspondent banks and digital currency exchanges that facilitate transactions involving an Iranian digital currency. That criminal liability is in addition to existing liability for sanctions avoidance.
The US has expressed concern because the Iranian government has suddenly realized that digital currencies are ideal for sanctions avoidance and two Iranian government agencies recently made public statements for advancing the development of a sovereign ICO for several purposes, including sanctions avoidance.
The first, Bill HR 7321, introduced by Michael Gallagher in the House of Representatives, called the Blocking Iran Illicit Finance Act:
- Would prohibit all transactions, financial and digital, related to Iran’s sovereign ICO in or through (e.g., correspondent banks) the US;
- Would require the Secretary of the Treasury to report to Congress on the status of Iran’s ICO, and the involvement of the Central Bank of Iran, and in that report, to describe the technical assistance that China, Venezuela and Turkey are providing to develop the sovereign ICO, as well as how an ICO by Iran could be used for sanctions avoidance;
- Would permit the US government to impose sanctions against persons or companies that assist Iran develop its sovereign ICO, including Blockchain development, or that list or re-sell the ICO or allow financial transactions to occur through a digital currency exchange or financial institution;
- And with respect to foreign persons, companies and digital currency exchanges assisting Iran to list or re-sell its sovereign ICO, would include provisions prohibiting correspondent banks from opening, using or transferring digital currency assets associated with Iran’s sovereign ICO; blocking the transfer of sanctions digital currency assets from entering the US; and visa banning foreign persons who assist Iran with respect to its sovereign ICO, from entering the US;
The Bill describes a digital currency exchange expansively to include persons who sell or purchase, or facilitate the sale or purchase of digital currencies, even if not incorporated and as such would include employees of digital currency exchanges conducting, or approving trades.
The second, Bill S.3758, introduced by Ted Cruz, of the same name, is the same as HR 7321.
Iran has lax money laundering and terrorist financial laws and more relaxed implementation of what little law there is. For example, in this interview, the owner of an Iranian digital currency exchange that provided services to Iranians wanted for SamSam computer intrusions and Bitcoin ransoms, describes his compliance with AML and CTF law as follows for on-boarding customers –> they obtain a selfie with a bank card and the national ID card plus a telephone number of the customer. That’s it – no verification of ID, no third party confirmation, no verification of whether the photo is fake. And he goes on to explain that in Iran, once you “KYC” a person, “there’s no reason to be suspicious.”