Iran's plan for cryptocurrency payments in the Strait of Hormuz faces skepticism from analysts, highlighting challenges for shipping firms.
Iran's plan to mandate cryptocurrency payments for transit through the Strait of Hormuz has been deemed "practically unfeasible" by analysts, according to Bloomberg. This initiative highlights a significant infrastructure aimed at evading sanctions, with the Islamic Revolutionary Guard Corps (IRGC) reportedly processing over $3 billion in digital assets last year, contributing to a total cryptocurrency ecosystem valued at $7.8 billion in Iran.
Experts from TRM Labs indicate that Tehran is facilitating virtual currency use through local intermediaries to maintain control over cryptocurrency transactions. For international dealings, Iran relies on these intermediaries, which recently faced sanctions from the U.S. Treasury for their role in stabilizing transactions worth approximately $1 billion linked to the IRGC.
Shipping companies operating in the Strait, many of which are based in the West, are already under strict regulatory scrutiny. Jake Ostrovsky from Wintermute noted that the high-risk nature of shipping could deter companies from engaging in transactions that might violate sanctions, as any link to the IRGC would compromise their operational cover.
Shipping Industry Implications
Operators accustomed to gray market practices may find it increasingly difficult to navigate these sanctions. They often rely on unregulated offshore brokers for cryptocurrency exchanges, but the inherent transparency of blockchain technology poses risks. Bohan Jiang, a senior derivatives trader at FalconX, pointed out that all transactions, including those involving stablecoins and Bitcoin, are publicly recorded, making them traceable.
Rich Rosenblum, co-founder of GSR, mentioned that the feasibility of using Bitcoin largely depends on the specific oil carriers involved. While some from the shadow fleet have begun using cryptocurrency, traditional operators face challenges in obtaining it without raising red flags on regulated exchanges, which would block any transactions connected to Iran.
Typically, the cost of transporting two million barrels of oil could amount to roughly $2 million, a sum that could be processed through exchanges if sanctions were not a concern. However, Rosenblum explained that most exchanges would avoid facilitating payments to Iran, complicating the acquisition of cryptocurrency for these operators.
Future Considerations
U.S. President Donald Trump has mentioned the possibility of a revenue-sharing arrangement for shipping through the Strait, which could simplify the payment process if agreed upon. Rosenblum suggested that such an arrangement would necessitate the creation of a distinct payment system by the Office of Foreign Assets Control (OFAC) and the Department of Energy for shipping companies.
Ari Redbord from TRM Labs noted that Iran continues to seek methods to bypass sanctions and detach itself from the U.S. financial system, a strategy that has gained urgency amid ongoing conflicts. He added that other sanctioned nations, including Russia and China, are also exploring alternative payment options to reduce reliance on Western systems.
Recently, Elliptic reported that Iran's central bank purchased $507 million in USDT, indicating its continued efforts to engage in cryptocurrency transactions despite the challenges posed by sanctions.
