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Iran's Central Bank has approved the cryptocurrency broker regulations despite consultations; however, challenges persist.
The final version of the "Regulations for Establishment, Operation, Dissolution, and Supervision of Cryptocurrency Brokers" has been released by Iran's Central Bank. While this marked the conclusion of consultations with industry experts, the approved text reveals that the amendments to the draft fall significantly short of the expectations of industry stakeholders. Many ambiguities and flaws in the initial draft remain unresolved.
The preliminary draft titled "Rules for Establishment, Operation, and Supervision of Cryptocurrency Brokers" sparked widespread criticism among technology ecosystem activists and experts. Critics argued that the Central Bank's document might either place cryptocurrency entirely under its control or leave it marginalized in Iran's market. Trade associations also raised concerns through official correspondence, emphasizing that regulatory guidelines for crypto exchanges jeopardize the assets of over 15 million users.
Regulation or Ecosystem Threat?
The Central Bank claims its objective with these regulations is to protect user interests and promote transparency. However, experts argue that intention alone isn't enough; methods and tools are equally crucial in addressing these concerns.
An analysis of the regulation’s provisions suggests that instead of facilitating brokerage activities, they act as a deterrent. The document reveals early on that its authors have not adequately defined the issue at hand. Proposed solutions fail to align with technical and economic realities of the cryptocurrency market.
Experts believe the Central Bank’s regulation diverges significantly from fundamental principles of modern regulatory frameworks. Rather than adopting a risk-based approach tailored to diverse market players, it imposes a heavy-handed one-size-fits-all model on all stakeholders. This unilateral approach could lead to increased operational costs for formal businesses, eliminate small and medium-sized startups, reduce market shares of active crypto organizations, and drive capital and users towards foreign platforms.
One major issue with both the draft and final regulation lies in ambiguous definitions that blur distinctions between "crypto-assets," "cryptocurrencies," and "crypto-money." The new document lumps everything from Bitcoin and stablecoins to security tokens under the term "crypto-money." This conceptual confusion not only perplexes industry participants but also risks overreach by the Central Bank into areas beyond its jurisdiction (such as non-banking assets). Experts term this phenomenon as "institutional interference" leading to "legal erosion."
Capital Requirements Reduced, but Not Enough
The Central Bank has addressed some key criticisms by implementing changes in its final version. For example, minimum capital requirements for Type 1 brokers were set at 40 billion tomans while Type 2 brokers (providers of exchange platforms and portfolio management services) now require 400 billion tomans, down from an initially proposed 1 trillion tomans.
Despite reducing capital requirements slightly - by 10 billion tomans for Type 1 brokers - these figures remain significant barriers for innovative startups seeking entry into the crypto ecosystem. Furthermore, no specific grace period has been outlined for meeting these capital requirements. Experts had suggested utilizing diverse funding sources such as registered capital, bank guarantees, intangible assets, gold reserves, crypto-assets, or other acceptable resources, a recommendation omitted in the final document.
Ownership Confusion
Under Article 15 of the initial draft regulation, establishing a "crypto-money broker" was restricted solely to general partnerships under relevant laws and regulations, a structure ill-suited to managing risks associated with modern financial technologies.
Experts argued that risks identified by the Central Bank could be better managed through alternative tools akin to those employed by other financial entities like brokerage firms or investment funds. They further criticized this limitation for precluding legal entities from participating in market development and investment within Iran’s crypto ecosystem.
Consequently, this provision was revised in the final version: existing exchanges can now apply for licensing under a mixed joint-stock company structure.
Collateral Requirements Addressed
Notably absent from the final regulation is any mention of depositing collateral equivalent to 50% of initial capital, a clause previously seen as a significant financial hurdle for formal operations. The removal of this requirement alleviates some financial pressure on businesses but does not resolve broader structural issues within these regulations.
Barriers to Growth Persist
Despite certain revisions aimed at mitigating immediate risks to industry collapse, scrutiny reveals that stringent oversight remains central to these regulations. The Central Bank appears intent on aligning cryptocurrency activities more closely with traditional financial structures under its control, prioritizing legal responsibility and low-risk tolerance over innovation and operational freedom.
Additionally, restrictions have expanded: requirements such as no unresolved bounced checks now apply not only to founders but also members of boards and CEOs under final regulations.
While permissible activity limits for brokers have doubled, from twice their registered capital up to four times, the existence of such caps inherently ties business growth directly back into registered capital levels, hindering organic expansion opportunities within rapid-growth sectors like cryptocurrencies.
Regulation for Control, Not Innovation
The final version of the cryptocurrency broker guidelines represents a half-hearted compromise between ecosystem pressures and the Central Bank’s regulatory objectives. By removing certain insurmountable financial barriers, the institution reduced the immediate risk of industry collapse. However, in exchange, it intensified regulatory oversight and imposed traditional financial structures, creating a framework that may ultimately stifle the spirit of innovation and competition in the long run.
Time will tell whether this “regulation” builds a secure and transparent market or pushes Iran’s crypto industry toward marginalization and monopoly.
