On-shore VASP in Iran

FATF Blacklisting: Iran is currently on the FATF's "Public Statement – High-Risk Jurisdictions Subject to a Call for Action," meaning it is subject to a call for countries to apply enhanced due diligence and, in the most serious cases, countermeasures to protect the international financial system from the ongoing money laundering, terrorist financing, and proliferation financing (ML/TF/PF) risks emanating from Iran. This significantly impacts any international VASP's ability or willingness to operate in or with Iran.

International Sanctions: Iran is under extensive international sanctions (primarily from the US), which prohibit most financial transactions involving Iranian entities or individuals, further complicating VASP operations.

Evolving Domestic Stance: Iran's stance on cryptocurrencies has evolved from outright bans to allowing regulated mining and exploring the use of crypto for bypassing sanctions (e.g., import payments), while generally maintaining strict controls over public trading and use for domestic payments.

Law on Combating Money Laundering (LCML):

Legislation Name: "Law on Combating Money Laundering" (Qanun Mobaraze ba Pulshui), initially passed in 2008 and amended in 2019.

Purpose: This is the foundational AML law in Iran, establishing general obligations for reporting entities (which would include any authorized financial service providers, including VASPs if fully integrated into the financial system).

Key Provisions: Defines money laundering offenses, sets reporting obligations, establishes the Supreme Council for Combating Money Laundering and Financing of Terrorism, and outlines the role of the Financial Intelligence Unit (FIU).

Law on Combating the Financing of Terrorism (LCFT):

Legislation Name: "Law on Combating Money Laundering" (Qanun Mobaraze ba Pulshui), initially passed in 2008 and amended in 2019.

Purpose: Addresses the financing of terrorism. Any VASP, if operating, would be subject to its provisions, especially regarding sanctions screening and suspicious transaction reporting.

Central Bank of Iran (CBI) Regulations and Directives:

Early Stance (2018): The CBI initially banned all dealings in cryptocurrencies by banks and financial institutions, citing money laundering risks.

Evolving Stance (2019-Present): The CBI later allowed cryptocurrency mining as an industrial activity, requiring miners to obtain licenses and sell their mined crypto to the CBI for import financing. However, the use of cryptocurrencies for domestic payments is generally prohibited, and public trading platforms for major cryptocurrencies face significant restrictions or are not officially sanctioned in a broad retail sense.

Applying Existing AML: The CBI's stance implies that any entity authorized to deal with virtual assets (e.g., licensed miners selling to CBI, or potentially future regulated exchanges) would be subject to existing AML/CFT laws and CBI directives regarding KYC, transaction monitoring, and reporting.

Identification and Verification:

National ID number (National Code for Iranians)

Contact information (phone, email)

Verification through official documents (e.g., National ID card, passport).

Legal name and trade name

Registration number and date

Legal form (e.g., company, partnership)

Registered address and principal place of business

Details of directors, senior management, and beneficial owners (shareholders owning 25% or more, or controlling persons).

Verification through official corporate documents (e.g., certificate of incorporation, articles of association).

Banned for Domestic Payments: The Central Bank of Iran (CBI) has repeatedly banned the use of cryptocurrencies for domestic payments and transactions within Iran.

Restrictions on Domestic Exchanges/Trading: While some local exchanges operate, individual trading and holding of cryptocurrencies are generally discouraged, tightly regulated, or even de facto illegal for retail investors for speculative purposes by the CBI. There is no clear legal framework for individuals to legally trade cryptocurrencies on a large scale.

Legal for Imports (Under Specific Conditions): In 2022, Iran officially approved the use of cryptocurrencies for import payments as a way to circumvent international sanctions. This is typically for businesses and under strict governmental oversight.

Status: Highly restricted, often considered illegal or at least strongly discouraged by the Central Bank for domestic speculative purposes. This makes a formal tax framework for individual gains largely moot.

No Comprehensive Law: Iran does not have a comprehensive, dedicated "Cryptocurrency Tax Law" that details specific rates and rules for all virtual asset activities like some Western countries.

Entities Targeted: Unlicensed cryptocurrency mining farms, both large-scale industrial operations and smaller home-based setups.

Illicit cryptocurrency mining without a license.

Confiscation of equipment: Thousands of mining rigs (ASICs) have been confiscated, valued at millions of dollars collectively. For example, in June 2021, Tavanir announced the confiscation of 7,000 illicit mining machines.

Fines: Imposed based on the amount of electricity consumed and potential damages. Specific individual amounts are rarely disclosed but can be substantial.

Arrests and Imprisonment: Individuals operating these farms often face arrest, fines, and potential prison sentences. Reports frequently mention dozens or hundreds of arrests during major campaigns.

Regulated Mining: Crypto mining is recognized as a legal industrial activity in Iran but requires licenses from the Ministry of Industry, Mine and Trade and is subject to specific regulations, including higher electricity tariffs.

Status: Legal, regulated industrial activity requiring licenses.