Leaders from Malaysia, Turkey, Qatar and Iran met late last week in Kuala Lumpur to discuss the prospect of a cryptocurrency for Muslim countries, the implementation of which could help blacklisted nations skirt US sanctions and reduce reliance on the US dollar.
“The Muslim world should be designing measures to save themselves from the domination of the United States dollar and the American financial regime,” said Iran’s Prime Minister Hassan Rouhani, who noted that the U.S. has used sanctions as the “main tools of domineering hegemony and bullying" of nations it dislikes.
Indeed, last week’s summit came just days after the US approved sanctions against Turkey. Sanctions have been in place against Iran off and on since 1979, after President Jimmy Carter imposed them during the hostage crisis. Though the European Commission is opposed to the financial embargo, the U.S.-controlled SWIFT payments network, which settles the world of the world’s financial transactions, has already blocked payments to Iranian banks.
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So the creation of a cryptocurrency payment network could indeed circumvent U.S.-led attempts to cripple Iran’s economy—at least on paper.
A long shot
Brett Bruen, president of consulting firm Global Situation Room and former US diplomat who served in former President Barack Obama’s White House, said last week’s move “reflects a shift by many countries around the world to adapt in a post-American world. We are seeing an emergence of new spheres of influence and institutions that are taking the place of those traditionally dominated by Washington.”
But will it work? Probably not, experts told Decrypt in interviews. While small, one-off transactions between businesses and individuals would slip under the radar, it’s highly unlikely trade would occur at a higher level, whether via a new “official” crypto or any other.
If a pan-Islamic currency be established for the purpose of evading sanctions, “authorities in the West can simply declare it subject to the sanctions regime, and no major legitimate entities, including cryptocurrency exchanges in those countries, will touch it,” claimed Kevin Werbach, a blockchain expert who teaches at the University of Pennsylvania.
“For a cryptocurrency to be effective at evading a sanctions regime, those outside the sanctions need to be willing and able to use it. Iran and Turkey don’t need a cryptocurrency to trade with each other,” he told Decrypt. “We already have Bitcoin,” he added. “What need would an Iranian/Turkish/Malaysian cryptocurrency serve for everyone else, other than violating the law?”
Steven Stalinsky, of Washington, DC-based Middle Eastern Media Research Institute (MEMRI), concurred and said that widespread adoption could be challenging. “Many of Iran’s proxies, including Hezbollah and other Shiite militias, have been hit hard by U.S. sanctions and could also look to such a cryptocurrency as a means around U.S. authority. I would find it very implausible that many countries would risk assisting Iran and its designated terrorist allies, as well as Turkey from evading sanctions and risk getting penalized themselves.”
Whither Saudi Arabia
Notably absent from last week’s summit was Saudi Arabia, the largest economy in the Arab world. Stalinsky said the summit was a “show of power” by its attendees, some of which support the Muslim Brotherhood, Hamas and Hezbollah, and “an attempt to challenge Saudi Arabia's status in the Muslim world.” But without support from leading nations, “there is little chance the proposed cryptocurrency will have any large impact,” he said.
Werbach saw opportunity for a cryptocurrency based around principles of Islamic finance, which opposes usury, among other things. “But that would look quite different, and wouldn’t be limited to three countries. A coin designed around religious principles that limit lending at interest would also fly in the face of the decentralized ethos of cryptocurrencies, which can operate as “programmable money”.
But, as debate over cryptocurrency’s permissiveness in Islamic finance is still ongoing, it might be a while yet before we see a Muslim crypto.