Guest views are now limited to 12 pages. If you get an "Error" message, just sign in! If you need to create an account, click here.

Jump to content

Recommended Posts

Iran Ditches Rial in Hyperinflation Crisis — Bitcoin Demand Rises 

Iran is set to redenominate its fiat currency, removing four zeros to create a new fiat called toman as demand for crypto is surging. 

57657 Total views 
133 Total shares 
Listen to article 
10:35 
 

Iran Ditches Rial in Hyperinflation Crisis — Bitcoin Demand RisesANALYSIS 

Ravaged by crippling hyperinflation, Iran’s Parliament has sanctioned the redenomination of its fiat — the rial — by replacing it with a new currency called the toman. According to the plan, each toman will be worth 10,000 rials.

The redenomination plan effectively removes four place values (four zeros) from the Iranian national currency as part of efforts to kickstart an economic recovery from the country. It is a move that echoes steps taken by other countries like Venezuela and Zimbabwe amid huge inflation.

With the United States exiting its nuclear deal with Iran and reintroducing sanctions, the country’s economic situation has been in a tailspin. Virtually frozen from the international scene, Iran has been facing a severe liquidity crunch and foreign exchange shortage.

Typically, people living in countries suffering from an economic crisis turn to cryptocurrency not only as a way of preserving wealth but also as a means of carrying out international transactions. Iran’s case is not dissimilar, with Bitcoin’s (BTC) price even rising to a hefty 300% premium on peer-to-peer exchanges like LocalBitcoins.

Iran’s struggle with hyperinflation

In May 2018, U.S President Donald Trump exited the Joint Comprehensive Plan of Action — commonly known as the Iran nuclear deal — and reimposed sanctions on Tehran. This decision put enormous pressure on the country’s already fragile economic situation. Commenting on the impact of U.S. sanctions on Iran, Babak Behboudi, the CEO of blockchain innovation firm Synchronium remarked:

“The U.S. sanctions are the major problem facing the Iranian economy in recent years, which have paralyzed a significant part of the economy. In an economy like Iran, where a significant part of the economy is still state-owned, such sanctions prevent economic stability and growth.”

While the deal was in place, Iran’s economy was open to the international scene, benefitting especially from increased oil exports. Indeed, the country’s president, Hassan Rouhani, ran his 2017 election campaign based on programs that would leverage the opportunities afforded by the accord with the U.S.

Iran's inflation rate year-to-year comparison

However, the rial was evidently deteriorating even before the U.S. repudiated the nuclear deal, with the country’s inflation rate more than tripling between 2017 and 2018. Indeed, the lifting of sanctions in 2016 did little to spur any growth in real gross domestic product. Between 2017 and 2018, protests broke out in many Iranian cities with people voicing their dissatisfaction over the rising cost of living among other grievances. By August 2018, Iran’s rial had lost more than 80% of its value in barely a year.

Faced with a rapidly declining economic situation, the central bank began placing restrictions on forex, a move meant to zzzzzzzzz the foreign exchange black market. The escalating rial devaluation meant the emergence of an expanding bid-ask spread on Nima — the country’s secondary forex market.

At the start of May 2020, the bid-ask spread — the difference between the buying and selling rate for forex — stood at about 9,000 rials. Exporters of non-essential goods in Iran use Nima, and the widening bid-ask spread on the market means having to liquidate overseas earnings at a much cheaper rate that, in turn, harms the profitability of such ventures.

The existence of a secondary forex market is in part due to the inability of the authorities to create a unified exchange rate. The government’s failure in this regard meant that a greater percentage of forex deals moved to the black market where participants could speculate on the unending volatility of the rial–dollar exchange rate.

At the time of writing, while the official government rate is about 42,000 rials to $1, the black market rate is almost four times higher — with $1 selling for 163,500 rials. Indeed, the Nima rate has also begun to approach the black market figures with $1 worth 157,320 rials.

Currency redenomination plans

Iran’s economic situation has also not been helped by the outbreak of COVID-19 with the country’s currency going into a deeper dive since February. The country has been hit hard by the deadly coronavirus with over 6,500 deaths from about 104,000 cases since the first confirmed infection in mid-February. According to an April report from the World Bank due to the dwindling oil revenues, the country’s GDP growth will continue to lag. The report reads:

“Persistence of lower oil prices and export volumes (e.g., due to a significant decline in China’s oil demand) would result in a substantially larger overall shock and fiscal deficit in 2020/21.”

On Monday, May 4, 2020, Iran’s Parliament authorized the redenomination of the country’s fiat, eliminating four zeros and replacing the rial with the toman. According to the plan, each toman will be equivalent to 10,000 rials. The move, more than a year in the making, began with a draft bill prepared by the governor of the Central Bank of Iran. Opting for a redenomination also marks a departure from the usual approach of Iran devaluing its currency — which happened about 3,500 times since 1971.

Rate of rial devaluation over past 10 years

Some commentators like government spokesperson, Ali Rabiei, have said the move will help to simplify financial transactions in the country. However, critics of the plan believe it does nothing to solve the fundamental issues affecting the economy.

Tehran late to the party

In a conversation with Cointelegraph, Ali Beikverdi, the CEO of crypto exchange deployment service bitHolla, remarked that Iranians have already been redenominating the country’s fiat to suit different purposes. According to Beikverdi: “Currency denomination in any country doesn’t solve any financial or economic issues. The only thing it does is inflation. However, I must say in Iran this has been a matter of debate for quite some time.” Explaining the confusion caused by multiple rial benchmarks in the country, Beikverdi added:

“While banknotes use Iranian rial, people already drop one zero and call it toman. So, one toman = 10 rial today. To add more to that confusion, people even drop three more zeros from toman to make the numbers smaller, and that is very confusing if you are not familiar with it. So, the currency denomination has already happened among people for simplicity, and this is nothing new.”

With multiple forex benchmarks existing within the country, the government’s redenomination plan might struggle to achieve the desired results especially given the historical precedence surrounding such actions. For Behboudi, it is still too early to determine the effectiveness of the government’s plan, arguing that taking four zeros of a currency will not have much effect in itself:

“Such an effort can be a good small step for a serious, wider, and more effective series of reforms, including well-planned privatization of the economy, decreasing the monetary system expenses, and ease of banking operations.”

In a conversation with Cointelegraph, a spokesperson for Iran’s Ministry of Finance derided the plan to create a new fiat currency for the country, declaring:

“Everybody in the country knows that redenomination has no effect on inflation. Most economists think it is not a sustainable time for redenomination. Due to coronavirus and oil prices, the revenue of the government has fallen sharply, and at the same time, the costs have grown. So, we expect high inflation.”

Bitcoin comes onto the scene

Amid the backdrop of the plans to revamp Iran’s currency, Cointelegraph reached out to Areatak, a blockchain solutions provider based in Tehran. Back in May 2019, Cointelegraph reported that Areatak — in partnership with the Informatics and Services Corporation of Iran’s central bank — was developing Borna, a national blockchain project aimed at transforming the country’s banking and financial sector. In a message to Cointelegraph, Areatak CEO Saeed Khoshbakht revealed the latest updates with the project, stating:

“Borna infrastructure and platform is passing the first phase of test and it will be ready soon to launch. As mentioned in the whitepaper, Borna can host central bank cryptocurrency, and maybe it is used in this economic evolution. But the decision is for the central bank and ISC.”

While the government tries to solve the growing inflation problem, crypto stakeholders in Iran say the situation favors a more broad-based adoption of cryptocurrencies. Indeed, high ranking officials within the country’s government and military have called for the use of digital currencies to evade crippling U.S. sanctions. Commenting on the growing adoption levels of crypto in Iran, Khoshbakht remarked:

“If we analyze the adoption of cryptocurrency usage in the world we find two types of countries are in front of the list. Countries with a lack of digital payment systems and countries with high inflation. Because of High inflation in Iran, people don’t trust to national currency and try to buy everything such as real estate, gold, stock, other currencies like the U.S. dollar and cryptocurrency.”

Tehran’s stance on crypto mining has noticeably softened with the authorities allowing Bitcoin miners to set up shop in the country. As previously reported by Cointelegraph, Iran has issued about 1,000 licenses to crypto miners in the country.

Related: Five Countries Where Crypto Regulation Changed the Most in 2019

Earlier in May, the country’s Ministry of Industry, Mining and Trade also gave the go-ahead to Turkish crypto mining firm iMiner to establish a 6,000-rig facility in the Semnan province. Iran has also given tax breaks to crypto miners on the condition that they repatriate all foreign earnings. According to Behboudi, crypto is primed for even greater adoption in Iran, adding: 

“Mining, holding and trading of cryptocurrencies, especially BTC and ETH, is widely adopted in Iran. I’m sure in next months we will see more investment by the public, especially the middle class, in cryptocurrencies like BTC.”

For Beikverdi, the economic crisis in the country is only setting the stage for more people to choose cryptocurrencies. “Once you see your currency loses its value more than five times in about two years, as an investor, you seek alternatives as a store of value,” remarked the bitHolla CEO.

Indeed, Bitcoin P2P trading data shows significantly higher BTC premiums in Iran since the start of 2020. On LocalBitcoins, Bitcoin has steadily sold for between 300% and 400% of the global average spot price.

For example, while Bitcoin traded at around $7,800 in early January, the quoted price for BTC on LocalBitcoins was the equivalent of over $25,000. While BTC recovered from the Black Thursday flash crash of March 12, the cryptocurrency seemingly traded for $21,000 while the global average hovered above $5,200.

  • Thanks 1
Link to post
Share on other sites
  • Replies 6.6k
  • Created
  • Last Reply

Top Posters In This Topic

Top Posters In This Topic

Popular Posts

FW....hate to disappoint you but Im not a "brother"        more like a sister ,girl, dudett , millionairess, female,  all of the above .....   

Talked with my banker buddy here in town to see if she was given even an Inkling of anything possible in the works. Nope She said that if or even if ever any country changes rates in a dramatic manne

Once we get the green light from Canadians banks I will put the plan in place so I can send to any interested so they won't need to figure out what to do here. As in paperwork, I.D. ect. pp

Posted Images

21 hours ago, gregp said:


 

Thanks SB!! You confirmed delete the zeros means moving the decimal. 
Thanks!!

:mexican::mexican:

 

Now if I can find a currency changer in Dubai that accepts Rial   
Just received my first email response back from a currency company in Dubai, and they don’t accept it. I’ll keep looking. Scared to death to try Kish Island at the moment, as an American. 


we just need to wait...they have the ability to exchange, they have contracts with exchange  companies  and access to over 1200 outlets world wide...just need to see how it unfolds all I know is that will need to conform to trumps requests..

  • Thanks 1
Link to post
Share on other sites
1 minute ago, screwball said:


we just need to wait...they have the ability to exchange, they have contracts with exchange  companies  and access to over 1200 outlets world wide...just need to see how it unfolds all I know is that will need to conform to trumps requests..


Agreed.  Time will tell.  
Thanks SB. 

  • Upvote 1
Link to post
Share on other sites

Iran Changes Currency to Toman

Riyal, currency of Iran

Iran Changes Currency to Toman

 
 

The parliament in Iran approved a bill allowing the government to delete four zeros from its currency; riyal, relabel it to Toman, following a sharp devaluation of it due to US sanctions.

As per the bill ‘Reforming Monetary and Banking Law’, the monetary unit will change officially from the rial to the commonly used toman.

Furthermore, the minor monetary unit of the new currency will be the ‘parseh’.

So, as per the newly ratified law, 10,000 rials will be equal to 1 toman and each toman will be equal to 100 parseh.

The parity rate of foreign currencies will be set and adjusted by the Central Bank of Iran (CBI) as per the new currency system.

“The law to delete four zeros from the national currency was approved by lawmakers,” the ISNA news agency said.

The bill, however, needs approval from a panel of clerics that examines the laws before they become effective in Iran.

 

https://see.news/iran-changes-currency-to-toman/

Riyal, currency of Iran

 
 

The parliament in Iran approved a bill allowing the government to delete four zeros from its currency; riyal, relabel it to Toman, following a sharp devaluation of it due to US sanctions.

As per the bill ‘Reforming Monetary and Banking Law’, the monetary unit will change officially from the rial to the commonly used toman.

Furthermore, the minor monetary unit of the new currency will be the ‘parseh’.

So, as per the newly ratified law, 10,000 rials will be equal to 1 toman and each toman will be equal to 100 parseh.

The parity rate of foreign currencies will be set and adjusted by the Central Bank of Iran (CBI) as per the new currency system.

“The law to delete four zeros from the national currency was approved by lawmakers,” the ISNA news agency said.

The bill, however, needs approval from a panel of clerics that examines the laws before they become effective in Iran.

  • Upvote 1
Link to post
Share on other sites

After sharp declines … Iran agrees to delete 4 zeros from its currency

May 4, 2020
0
6
 
Share
 
 
 
 
 
 
 
 
 
 
 
4b519503-eff6-41e7-b06a-23498202be58_16x

 

Last updated: Monday 11 Ramadan 1441 AH – May 04, 2020 KSA 11:08 – GMT 08:08 
Posted on: Monday 11 Ramadan 1441 AH – May 04, 2020 KSA 09:40 – GMT 06:40

Source: Dubai – Reuters

Official Iranian media confirmed today, Monday, that the Iranian parliament approved a bill allowing the government to delete four zeros from the riyal, after a sharp decline in the value of the currency due to US sanctions.

Under the project, Iran’s national currency will change from one riyal to a toman, which equals 10,000 riyals.

“The law to delete four zeros from the national currency was approved by lawmakers,” the Iranian Student News Agency said. The bill needs approval from a panel of clerics that examines the laws before they become effective.

State television said it would take two years for the Iranian central bank to “pave the way for the currency to be converted to Toman.”

The idea of deleting four zeros in circulation since 2008, but it became more urgent after 2018, when US President Donald Trump withdrew from the 2015 nuclear agreement and reimposed sanctions, as the riyal lost more than 60% of its value.

According to foreign exchange sites, the Iranian currency recorded about 156,000 riyals per dollar in the informal market today.

The weak currency and high inflation have sparked intermittent protests since late 2017.

 

 

  • Upvote 2
Link to post
Share on other sites
  • 4 weeks later...

This is extract from something I read thought I would post sorry no link

 

Page 65

 

"It is planned to remove zeros off currency and make the rial value real," Iran's government website quoted Ahmadinejad as saying. "The value of rial, under the law, is calculated on the basis of the price of gold. For some reason, the rial has been devaluated and we have to return its value to the one existing in the law."

 

old but thought it would put a smil on people's face!

  • Thanks 3
  • Upvote 1
Link to post
Share on other sites

Let’s not forget this 

 

Cabinet votes to whack four zeros off former rial

 

Central Bank Governor Mahmud Bahmani said the decision was made by the cabinet Sunday. He did not announce the new name of the currency, but said it would be published “soon” on the bank’s website.

Bahmani said it would take “at least three years” before the currency shift would take place. Back on April 20, Bahmani said it would take at least two years before Iran was ready to knock any zeros off its national currency. Ten days prior to that, Bahmani said the shift would take “one to two years.”

Bahmani gave no explanation for the constantly changing timetable.

He has, however, stuck with the intention to drop four zeros from the rial, converting 10,000 rials into one rial. He first announced the four-zero drop in April—changing from the three-zero drop that he announced in September 2009 after what he described as a long study by the Central Bank.

The shifting of implementation deadlines and the number of zeros to be dropped telegraphs considerable confusion within the Central Bank on what is really a rather minor policy issue with no impact on monetary policy. It begs the question of whether there is equal confusion on more important matters that could impact the economic health of the state.

Back in April, Bahmani said the shift from dropping three zeros to dropping four would give the rial parity with the US dollar. Right now, $1 equals about 10,500 rials. By shifting the decimal point four digits to the left, one dollar will cost 1.05 rials.

Bahmani failed to say why Iran would want the rial to have parity with a currency the Islamic Republic says is dying and is rapidly being rejected by the rest of the world. Three years ago, Ahmadi-nejad ordered all government agencies to calculate foreign exchange requirements in terms of the euro. But Ahmadi-nejad’s own budget continues to use dollar conversions and only a handful of government agencies state foreign exchange in terms of the euro.

Ahmadi-nejad started a vocal campaign against the dollar, calling it a weak currency. Perhaps not coincidentally, that was just after the US Treasury started its campaign to limit Iran’s ability to conduct transactions in the dollar.

The government has been talking about changing the national currency to get rid of the voluminous zeros ever since 2007 without ever actually doing anything about it.

The problem is that one rial will buy nothing. One rial is currently worth a tad more than 1/100th of a US cent. It takes 105 rials to make a single US penny.

The rial has dropped drastically since the Islamic revolution, from 70 to the dollar in 1979, to around 10,500 today.

Back in April, Bahmani said the name of the new currency would not change. He did not say Sunday why he had now changed his mind.

Bahmani said, “Some people think removing the zeros will weaken the national currency … but it will instead cut inflation. Removing four zeros will also facilitate trade.” But lopping off zeros is purely cosmetic and has nothing at all to do with inflation or the value of the currency. The main benefit of such a change is convenience. The public is no longer dealing with immense figures—millions, billions and trillions. A $100,000 house in Tehran is worth 1 billion rials.

If the rial indeed is configured to be close to a dollar, Iran will likely resurrect the dinar. The rial is officially divided into 100 dinars, but the dinar is now a relic recalled only by the very aged. The dinar effectively died with the gross inflation of World War II.

The rial was introduced in 1798 by the new Qajar Dynasty. In 1825, the Qajars changed the name to gheran. In 1932, the Pahlavi Dynasty switched from the gheran back to the rial, with the rial worth about 10 US cents of the day and divided into 100 dinars.

The Pahlavi rial slipped in value from about 10 to the dollar in 1932 to 70 to the dollar by the late 1950s. It then remained very stable—one of the world’s most stable currencies for two decades—until the 1979 revolution when it went into a sharp plunge.

The term rial (in various spellings) is currently used for the currencies of Brazil, Cambodia, Saudi Arabia, Yemen, Oman and Qatar.

Many countries shift the name of their currency when they lop off zeros and present the new currency as the end of inflation. Inflation, however, results from government policies, not the name of a currency.

Brazil, for example, used one new currency after another in the 1980s before creating the “real” in 1994 and simultaneously shifting its financial policies so as to end rampaging inflation.

Other terms that have been used for Iranian currencies over the centuries include the shahi, abbasi, naderi, dozari and toman. Most of those terms have monarchial connotations. Toman is in common usage, however, to mean 10 rials. It is the normal street term instead of rial. However, one toman is worth but 1/10th of a US cent.

 

http://iran-times.com/cabinet-votes-to-whack-four-zeros-off-former-rial/

  • Thanks 2
Link to post
Share on other sites
On 6/11/2020 at 6:26 AM, screwball said:

Good luck to those that took a small gamble..

 

Yup Yup, Good luck to you all my friends :praying:

 

On 6/11/2020 at 10:57 AM, md11fr8dawg said:

Thanks screwball. Small gamble indeed. I've spent more on a good drunk than I have invested in the rial, but who knows??

 

Yup indeed, you never know as I've long ran out of bottles of whiskey than I can count over the years waiting lol we continue to remain hopeful!! :drunk::lol::cheesehead:

  • Thanks 2
  • Haha 1
Link to post
Share on other sites
16 hours ago, southbeach said:

Please remember to tell me where to exchange Rial for USD or whatever currency that can be exchanged for USD when this happens and thanks all.

Will do...

 

  • Like 1
  • Thanks 2
Link to post
Share on other sites
  • 2 weeks later...

Well thanks for all the great posts everyone. Took me quite awhile to read them all and yes it does look promising to say the least. here is hoping something positive happens soon !!

 

pp

  • Like 1
Link to post
Share on other sites
58 minutes ago, pokerplayer said:

Well thanks for all the great posts everyone. Took me quite awhile to read them all and yes it does look promising to say the least. here is hoping something positive happens soon !!

 

pp

Hi PP!

Link to post
Share on other sites

Join the conversation

You can post now and register later. If you have an account, sign in now to post with your account.
Note: Your post will require moderator approval before it will be visible.

Guest
Reply to this topic...

×   Pasted as rich text.   Paste as plain text instead

  Only 75 emoji are allowed.

×   Your link has been automatically embedded.   Display as a link instead

×   Your previous content has been restored.   Clear editor

×   You cannot paste images directly. Upload or insert images from URL.

Loading...
  • Recently Browsing   0 members

    No registered users viewing this page.




×
×
  • Create New...

Important Information

By using this site, you agree to our Terms of Use.