Iran -- Securities Classification Regulatory Overview

Iran's approach to classifying cryptocurrency tokens, particularly as securities, is significantly different from jurisdictions like the U.S. (with its Howey Test). The Iranian regulatory landscape is characterized by caution, a focus on capital control, anti-money laundering (AML), and leveraging digital assets for sanctions circumvention, rather than fostering an open market for private token offerings.

Crucially, Iran does not have a comprehensive, explicit legal framework that specifically classifies private cryptocurrency tokens as securities using an equivalent of the Howey Test. Instead, the regulatory environment is largely prohibitive or highly restrictive regarding public offerings and trading of private tokens, with a greater focus on state-backed digital currencies and regulating cryptocurrency mining.

Here's a breakdown of the current situation:

Legal Framework and Primary Regulators

1. Central Bank of Iran (CBI): The primary regulator for financial and monetary affairs, including cryptocurrencies. Its stance has largely been to ban banks and financial institutions from dealing in cryptocurrencies and to restrict their use for domestic payments. The CBI is also involved in developing a national digital currency (CBDC).
2. Ministry of Industry, Mines, and Trade (MIMT): Responsible for licensing and regulating cryptocurrency mining operations.
3. Securities and Exchange Organization (SEO): Traditionally regulates securities in Iran under the Securities Market Law of the Islamic Republic of Iran (2005). However, its direct role in classifying private cryptocurrency tokens as securities for public offerings is minimal, largely because such offerings are not openly permitted or have been discouraged by the CBI.
4. National Cyberspace Center (NCC) / Economic Council / Parliament: These bodies are involved in drafting and approving broader legislation concerning digital assets and cyberspace, which may eventually include more detailed provisions for crypto classification.

The Legal Test Used (Howey Test Equivalent)

There is no explicit "Howey Test equivalent" for classifying private cryptocurrency tokens as securities in Iranian law.

• Traditional Securities Law: Iran's Securities Market Law of 2005 defines "securities" generally to include shares, bonds, mutual fund units, and other instruments that grant ownership rights, debt claims, or partnership interests.
• Lack of Specific Crypto Guidance: The challenge with private crypto tokens is that they haven't been explicitly brought under this existing framework for public offerings. The regulatory emphasis has been on banning or heavily restricting their use rather than establishing a formal classification process for investor protection in a public market context.
• Implicit Interpretation (Hypothetical): If a private token were to be issued seeking public investment with an expectation of profit derived from the efforts of others (similar to the Howey test's criteria), it would likely face significant scrutiny and potential prohibition under existing financial regulations, rather than being formally classified and regulated as a security by the SEO. The primary concern would be capital flight, AML, and monetary stability, as opposed to investor protection in a nascent token market.

Which Tokens are Considered Securities

• No specific private crypto tokens are formally recognized and regulated as securities for public offering in Iran.
• National Digital Currency (CBDC): The CBI has been developing a national digital currency, often referred to as "Paymon" or the "Digital Rial." This is a central bank-issued currency, not a public investment security, intended for domestic payments and interbank settlements.
• Mining as a Regulated Activity: The tokens acquired through licensed mining operations (e.g., Bitcoin, Ethereum) are treated as commodities or assets that can be used for specific purposes (like paying for imports), but the act of mining itself is a licensed industrial activity, and the tokens are not classified as securities by the MIMT in this context.
• Tokens for International Trade: In 2022, a law was passed allowing the use of cryptocurrencies for import payments. These tokens are treated as a means of exchange for international trade, not as domestic securities.

Registration/Exemption Requirements for Token Issuers

• There are no formalized registration or exemption requirements for private crypto token issuers seeking to conduct public offerings in Iran. This is because such activities are generally not permitted or are severely restricted.
• Any entity attempting to launch an Initial Coin Offering (ICO) or similar token sale to the Iranian public would likely face regulatory challenges, including potential bans or legal action from the CBI, given the restrictions on cryptocurrency activities by financial institutions and the general public.
• The focus of Iranian authorities is on preventing unauthorized financial activities and capital flight, not on providing a framework for public token offerings.

Secondary Trading Rules

• No formal rules exist for the secondary trading of private crypto tokens as securities.
• General Cryptocurrency Trading: While a full ban on individuals owning or trading cryptocurrencies is difficult to enforce, the CBI has repeatedly warned against their use and banned financial institutions from dealing with them.
• Exchanges: Many local crypto exchanges operate in a legal grey area, requiring users to comply with AML/KYC norms, often to avoid outright shutdowns. However, these are typically platforms for exchanging general cryptocurrencies (like Bitcoin for Rial), not regulated securities trading platforms for tokenized assets.
• Licensed Platforms: The government has indicated a desire to license exchanges, primarily to control the flow of capital and ensure AML compliance, rather than regulating a securities market for tokens.

Enforcement Examples

Enforcement in Iran primarily focuses on:

1. Unauthorized Crypto Exchange Operations: Several arrests have been made, and exchanges have been shut down for operating without proper authorization or for facilitating illegal activities (like capital flight or prohibited domestic payments).
2. Use of Crypto for Domestic Payments: Individuals and businesses attempting to use cryptocurrencies for everyday transactions within Iran have faced warnings and potential legal action, as this goes against the CBI's prohibition on crypto as legal tender.
3. Unlicensed Mining Operations: Authorities frequently crack down on unlicensed crypto mining farms, especially those illegally using subsidized electricity.
4. Capital Flight: Any significant movement of capital out of the country via cryptocurrencies is a major concern and subject to stringent enforcement.

Specific Examples (often reported by local news or semi-official sources):

• 2018: The CBI officially banned Iranian banks and financial institutions from dealing in cryptocurrencies, citing money laundering and financing of terrorism concerns.
• Ongoing (2020-Present): Numerous reports of police raids on illegal crypto mining operations, resulting in confiscation of equipment and arrests.
• Ongoing: Warnings issued by the CBI and law enforcement against illegal cryptocurrency exchanges and platforms that do not adhere to AML/KYC regulations or facilitate prohibited activities. The judiciary has often highlighted the risks associated with investing in unregulated crypto schemes.

Specific Legislation and Regulatory Guidance URLs

It's challenging to provide direct, stable, English-language URLs for Iranian legal texts due to the nature of their government portals and the frequent updates/drafts of regulations. However, here are references to key policies and sources often cited:

1. Central Bank of Iran (CBI) Statements/Circulars:

   • The CBI's stance on prohibiting banks from dealing with cryptocurrencies was formalized in a circular in April 2018. While a direct English-language URL to the official circular is difficult to obtain, it has been widely reported by reputable news agencies.
   • General CBI website (Farsi): https://www.cbi.ir/ - Navigate to "News" or "Circulars" for updates, which would need translation.

2. Ministry of Industry, Mines, and Trade (MIMT) Regulations on Mining:

   • The MIMT issued regulations in 2019 and subsequent amendments for licensing cryptocurrency mining farms, treating it as an industrial activity. These regulations detail energy tariffs, licensing procedures, and export requirements for mined crypto.
   • General MIMT website (Farsi): https://www.mimt.gov.ir/ - Specific regulations on crypto mining are usually found in their "Laws and Regulations" section, requiring translation.

3. Law on Using Cryptocurrencies for Import Payments:

   • Approved in 2022, allowing registered importers to use cryptocurrencies to pay for imports. This was a significant shift, but it specifically targets international trade, not domestic securities offerings.
   • Often reported by Iranian English news outlets like Tehran Times or Mehr News Agency.

4. Securities Market Law of the Islamic Republic of Iran (2005):

   • This is the fundamental law governing securities in Iran. While it doesn't mention crypto, it's the basis for what would constitute a security if tokens were brought under the SEO's purview.
   • Often referenced in legal analyses; official English translations are scarce.

5. Draft Comprehensive Digital Currency Regulation / Law on the Organization of Cyberspace:

   • Various drafts have been under discussion by different governmental bodies (Parliament, Economic Council, National Cyberspace Center) for several years. These drafts are expected to provide a more holistic framework for digital assets, including potential classifications, but are still in progress and subject to change.
   • News reports often provide updates on these drafts; direct official URLs are not usually public until final approval.

In summary, Iran's regulatory environment for cryptocurrency tokens is characterized by a high degree of state control and caution. There is no established legal test akin to the Howey Test for classifying private crypto tokens as securities, largely because public offerings of such tokens are implicitly or explicitly discouraged and face significant regulatory hurdles due to broader economic and financial policy objectives.