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Getting around sanctions with crypto-rial

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In April 2018, the Central Bank of Iran banned domestic banks and people from dealing in foreign cryptocurrency because of money laundering and financing risks.

However, the CBI decided to take a more moderate stance toward the digital money and blockchain technology following the imposition of a new round of U.S. sanctions, hoping that the digital technology would facilitate Iran’s international money transfers and let the country evade the sanctions.

Meanwhile, as an oil producer with an oil-reliant economy dominated by petrodollars, Iran settled on the plan to utilize cryptocurrencies and blockchain technology to make up for any drop in oil revenues due to the economic sanctions designed to cut its oil sales.

Moving on the same track as China, Russia and Venezuela, Iran also hopes that blockchainization of state-backed fiats would lead to the demise of the dollar and put an end to the tyrant U.S. policies.

Under the toughest U.S. sanctions ever and blacklisting of Iran from the Belgium-based international financial messaging system (SWIFT), the country’s plan to create an indigenous cryptocurrency is improving incrementally and thanks to highly dynamic nature of the cryptocurrency, it can act as a good means for Iran to skirt certain sanctions through untraceable banking operations.

The CBI has been working with domestic knowledge-based companies to develop a digital currency, called crypto-rial, supported by HyperLedger Fabric technology.

As reported, the Informatics Services Corporation, affiliated to the CBI but run by the private sector, has accomplished development of rial-based national cryptocurrency and when the CBI approves the uses of national cryptocurrency, it will be issued to financial institutions such as banks to test payments and internal and interbank settlements.

Transactions at the state-backed virtual currency are carried out on an online ledger called a blockchain, just the same as Bitcoin, but since the infrastructure is privately-owned it will not be possible for people to mine it.

In fact, Iran is mainly aimed at testing the potentials of blockchain and crypto technology in running its financial system, making banks able to use the tokens as a payment instrument in transactions and banking settlement at the first phase of the blockchain banking infrastructure. The country seems inclined to enjoy the new virtual currency businesses which includes little notice or footprint and has also prepared the required infrastructure for trading cryptocurrency in its stock exchange.

However, in spite of the CBI’s prohibition from trading cryptocurrencies, Iranians had commenced using cryptocurrency and Bitcoin mining for transactions with the rest of the world before its use was banned by the CBI in the country.

Individuals and businesses in Iran have had access to virtual currency platforms through “Iran-located, internet-based virtual currency exchanges; U.S. or other third country-based virtual currency exchanges; and peer-to-peer (P2P) exchangers,” according to reports.

But the U.S. embargo on a number of cryptocurrency exchange platforms, including Binance and Bittrex, restricted Iran from receiving services, however, no assets belonging to Iranians were blocked. U.S. sanctions have also ensnared Iranian bitcoin traders.

Furthermore, in December, the U.S. Financial Crimes Enforcement Network, known as Fincen, issued a warning in an advisory to assist U.S. banks and other financial actors such as cryptocurrency exchanges in identifying “potentially illicit transactions related to the Islamic Republic of Iran,” Bitcoin.com reported.

Fincen claimed that since 2013 Iran’s use of virtual currency includes at least $3.8 million worth of bitcoin-denominated transactions per year. The organization noted that “while the use of virtual currency in Iran is comparatively small, virtual currency is an emerging payment system that may provide potential avenues for individuals and entities to evade sanctions.”

Fincen believes that P2P cryptocurrency exchangers are a significant means through which Iran can dodge economic sanctions.
Following the Fincen’s announcement, the United States lawmakers introduced a bill (HR 7321) to impose more sanctions on Iranian financial institutions and the development and use of the national digital currency, Cointelegeraph reported.

The act prohibits transactions, financing or other dealings related to an Iranian digital currency, and introduces sanctions on foreign individuals engaged in the sale, supply, holding or transfer of the digital currency.

In the wake of the U.S. restrictions, thus, cryptocurrency trades are limited into Iran’s domestic market and not possible at the international level and Bitcoin is sold at a significant premium relative to the global average price in Iran.

Unfortunately, the basic and premier regulations of using cryptocurrencies have not been ratified in Iran and Iranians are obliged to refer to stock exchange shops abroad to do their crypto-transactions, most of which are American obedient to U.S. regulations and of course, sanctions.

To make using cryptocurrency and blockchain technology legal and official in the country, the Iranian government is drafting a policy framework by the help of the CBI and the Stock Exchange Organization which clarifies all its regulations and policies over cryptocurrency and mining.

Being legislated, it is believed that SWIFT can be replaced by the digital money, i.e. the rial-pegged national currency, and transactions would be done faster and at lower prices.

Due to a lack of required regulations, cargos of equipment for mining cryptocurrency are seized by the customs administration. They are said to be released as soon as the government legalizes cryptocurrency use in the country.

First published in our partner Tehran Times

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Economy

Business disorder between Europe and U.S.

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The European Union remains cautious in the economic battle with the White House. U.S. President Donald Trump continues to pursue his protectionist policies in international trade system. This has led to raising concerns and serious discontent among the United States’ European partners.

Disputes between the United States and other countries around the world are continuing on trade and economic issues. The fact is that U.S. President Donald Trump intends to exacerbate tensions until the presidential elections of 2020. Many international experts and analysts believe that a major part of the economic approach to the world of Trump has an electoral and political goal.

Many international analysts now talk about the conflicts between the United States and Europe over imposing sweeping steel and aluminum tariffs as a transatlantic “trade war”.

Conflicts that may extend in the near future and affect the widespread relations between Washington and Europe.

On the other hand, the authorities of Germany, Britain and France have not taken a proper approach to the policies of the President of the United States.Though politicians such as Emmanuel Macron, Angela Merkel and Theresa May seek to manage the situation and prevent the exacerbation of tensions with Washington, but people, business owners and European opposition parties are so angry at Trump and the U.S. government that the European troika’s authorities aren’t capable to control or even hide it.

One of the most important reasons for the continuation of Trump’s economic policies in the world is the passivity of European leaders against the White House. Under such circumstances, Europe has threatened to retaliate against the U.S. if Trump imposes steel and aluminum tariffs on European exports.

After Trump made his first announcement on the tariffs, European Commission President Jean-Claude Juncker threatened to put tariffs on American goods in response to Trump’s decision. That could decrease demand for those products inside EU borders and consequently lead to U.S. workers losing their jobs. But practically, European countries did not do anything about this.

Although some European citizens thought that the Chancellor of Germany would have a more determined approach than other European politicians, this was also a mistake!The German Chancellor stated that European Union member states must give the EU trade commissioner a clear mandate for negotiations with the United States over a long-term exemption from U.S. metal tariffs. Markel added: “Of course, we think it’s important that there are exemptions not only for a limited period of time … So far, we have had a very united stance, namely that we view these tariff demands as unjustified and that we want a long-term exemption.”

The fact is that Merkel’s implicit threat, which she didn’t address directly and explicitly because of her conservative policy towards the United States, is the same as the “European countermeasures” against the United States.

For months now, there have been months of anti-European measures taken by the White House and customs duties on European aluminum and steel. However, European countries have preferred to keep Silent instead of confronting Washington!
Indeed, the prolonged U.S.-EU talks on steel and aluminum tariffs is going to increase the dissatisfaction and anger among the European public opinion. It will also affect the performance of American companies in Europe.

First published in our partner Tehran Times

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Economy

Citizen Capitalism: How a Universal Fund can provide Influence and Income to all

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In the face of growing wealth inequality worldwide, more and more people are discussing alternatives to the current laissez-faire capitalism status quo.  Tamara Belinfanti, Sergio Gramitto and the late Lynn Stout offer up their own solution in Citizen Capitalism: How a universal fund can provide influence and income to all.

Our authors have devised up a concept they call the Universal Fund.  It’s like a sovereign wealth fund, but is privately created and funded via private ordering. That means that the Universal Fund is to be created from donations of stocks by companies and philanthropists.  The government would hence be uninvolved; the Universal Fund is not a socialist venture.  Rather, it is in part modeled on the structure of NGOs like the Sierra Club and the Red Cross. The Fund would provide an annual dividend to every citizen, with no maximum income cap.  Though it may seem absurd to send welfare payments to the wealthy, it’s politically savvy framing.  A free public college bill was passed in ultraconservative Tennessee thanks to having no maximum income cap; conservative detractors weren’t able to use the “class warfare” and “welfare queen” arguments. It should be noted that charitable tax deductions, estate tax reductions and lowered tax brackets would act as a de facto government incentive for the wealthy to donate to the Universal Fund.

The goals of the Universal Fund would be to decrease wealth inequality, encourage long-term investment and increase civic engagement in corporate culture.  On the last point, the authors remind us that, “The top 10% [of wealthiest Americans] hold more than 90% of all shares.”  Even in regards to the other 10% of shares owned, most of them are passively owned.  Most small-time investors don’t have time to vote in the annual general meetings of every company in which they are invested in.  Thus, boardroom votes are dominated by two shareholder proxy advisory firms and individual investors who own a substantial percentage of shares, as well as fund portfolio & hedge fund managers.

These Wall Street elites naturally tend to vote based upon their elitist interests.  Thus, they usually make decisions that are insane in terms of employee welfare, long-term corporate growth, executive pay and the environment. For example, `the authors remind us of the recent case of Martin Shkreli, the hedge fund manager who acquired Turing Pharmaceuticals and then raised AIDS medication prices from $13.50 to $750. This is the embodiment of the Reagan-era Golden Rule of maximizing shareholder value.  Not only is this Gordon Gekko truism objectively crazy, it’s actually legally unfounded.  Contrary to what you hear on CNBC or Fox Business, there’s no legal requirement that companies only focus on maximizing shareholder value.  The book relates the following quote from Supreme Court Justice Samuel Alito comments in the recent case Burwell v. Hobby Lobby:“Modern corporate law does not require for-profit corporations to pursue profit at the expense of everything else, and many do not do so.”

CITIZEN CAPITALISM points to the ongoing successes of the sovereign wealth funds of Norway and Alaska, an ultraliberal and an ultraconservative society, respectively.  The Alaskan fund generally provides each citizen with a dividend payment of a few thousand dollars each year, via the state’s oil revenues.  The Government Pension Fund Norway is a more pertinent example, since it’s funded through a $1T stock portfolio.  Norway is not only able to fund its citizens’ pensions through the Fund, but also exert a moral influence on the market.  The Fund boycotts various egregious companies, like cigarette manufacturers, and will sell its shares in a company that gets exposed for abusive practices, like say employing child labor.  Our authors likewise want the Universal Fund to use a carrot-and-stick approach in regards to corporate ethics.

The thesis of CITIZEN CAPITALISM is, as the title suggests, rooted in optimism for capitalism.  Though they write about the success of socialist program in Alaska specifically, a conservative state in the US, the authors are convinced that a sovereign wealth fund bill could never be passed in Congress.  Recent polls and election results, however, show that Americans are starting to overwhelmingly favor ambitious government-program proposals like Medicare for All and a Green New Deal.  As I wrote before, the Universal Fund would mostly be feasible due to tax incentives; these government incentives would likely need to be greatly expanded in order to encourage enough stock donations to build the Fund to a substantial size.  Even America’s greatest philanthropists still stockpile billions of dollars in their offshore bank accounts.  Thus, one shouldn’t expect the Universal Fund or other private UBI schemes to become a replacement for state management of wealth inequality through programs like public school funding and marginal taxation.  Nonetheless, CITIZEN CAPITALISM is a stimulating little primer for rethinking the relationship between Wall St and Main St, managing the looming crises of a rapidly aging workforce and automation, plus the balancing of private and public sectors in regards to solving societal problems.

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Economy

Working for a brighter future

Cyril Ramaphosa

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Authors: Cyril Ramaphosa and Stefan Löfven*

We stand at a crossroads as seismic shifts take place in the world of work.

Technological advances are changing the nature of many jobs, and leading to the need for new skills. The urgently required greening of economies to meet the challenge of climate change should bring further employment possibilities. Expanding youth populations in some parts of the world, ageing populations in others, may affect labour markets and social security systems.

On one path, countless opportunities lie ahead, not only to create jobs but also to improve the quality of our working lives. This requires that we reinvigorate the social contract that gives all partners a fair stake in the global economy.

On the other path, if we fail to prepare adequately for the coming challenges, we could be heading into a world that widens inequalities and leads to greater uncertainty.

The issues are complex. As co-chairs of the Global Commission on the Future of Work  we, and our fellow members of the Commission – leading figures from business and labour, think tanks, government and non-governmental organizations – have been examining the choices we need to make if we are to meet the challenges resulting from these transformations in the world of work and achieve social justice.

We call for a new, human-centred approach that allows everyone to thrive in a carbon neutral, digital age and affords them dignity, security, and equal opportunity. It must also meet the changing needs and challenges facing businesses and secure sustainable economic growth.

The opportunities are there to improve working lives, expand choice, close the gender gap and reverse the damage that has been wreaked by global inequality.

But it will need committed action on the part of governments and social partners to turn those opportunities into reality.

So how do we achieve this? Three areas of increased investment are needed:

First, we have to invest more in people’s capabilities: This means establishing an effective lifelong learning system that enables people to skill, reskill and upskill – a system that spans early childhood and basic education through to adult learning. It also means investing in the institutions that will support people as they go through transitions in their working lives – from school leavers to older workers. Making gender equality a reality and providing social protection from birth to old age are also critical. These social investments will not only increase productivity. They will also allow for a more inclusive growth, where informal workers and business can both benefit from and contribute to a sound formal economy.

Second, we must invest more in the institutions of work – including the establishment and implementation of a Universal Labour Guarantee. This will ensure that all workers enjoy fundamental rights, an “adequate living wage”, limits on their hours of work and safe and healthy workplaces. Linked to this, people need to have more control over their working time – while meeting the needs of enterprises – so that they can fulfill the full range of their responsibilities and develop their capabilities.

Collective representation through social dialogue between workers and employers needs to be actively promoted. Workers in the informal economy have often improved their working conditions by organizing. Unions need to expand membership to informal workers, whether they work in the rural economy, on the city streets of an emerging economy or on a digital platform. This is a critical step towards formalization and a tool for inclusion.

We’re also calling for governance systems for digital labour platforms that will require these platforms and their clients to respect certain minimum standards.

Finally, we need to invest more in decent and sustainable work. This includes incentives to promote investments in key areas, such as the care economy, the green economy, and the rural economy, as well as high-quality physical and digital infrastructure. We must also reshape private sector incentive structures to encourage a long-term, human-centred approach to business. That includes fair tax policies and improved corporate accounting standards. We need to explore new measures of country progress to track important aspects of economic and social advancement.

Beyond these critical investments, there is a further opportunity: to place discussions about the future of work at the heart of the economic and social debates taking place at the high table of international policy-making. This could revitalize the multilateral system at a time when many are questioning its legitimacy and effectiveness.

Yet none of this will happen by itself. If change is the opportunity, we must seize the moment to renew the social contract and create a brighter future by delivering economic security, equal opportunity and social justice – and ultimately reinforce the fabric of our societies.

Stefan Löfven, Prime Minister of Sweden, co-chairs of the ILO Global Commission on the Future of Work

ILO

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