Initial Capital of 4 Billion Tomans; A Barrier Against 'Unauthorized' Currency Traders

The deadline for unauthorized currency traders to obtain a license from the Central Bank expired on Wednesday, August 28, and from Thursday, unauthorized traders will no longer be able to conduct currency transactions. According to IRNA, legal action will be taken against currency traders without official licenses. In August 2013, the Central Bank of Iran revised the regulations for the establishment, operation, and supervision of currency traders that were originally set in 2010, due to environmental changes, economic conditions, and the role of currency traders in currency rate fluctuations, which it described as 'creating false demand and speculation.' However, this regulation faced criticism from traders who deemed the changes unreasonable, as it required them to increase their capital suddenly between 4 to 16 billion tomans. This regulation led to protests from traders, prompting Eshaq Jahangiri, the First Vice President, to issue a directive on August 28, 2014, to organize currency trading. Based on this directive, the new operational guidelines for currency traders were revised and issued. The new guidelines still set a high minimum initial capital for many involved in this field. A Tehran-based trader, who wished to remain anonymous, stated in an interview with Radio Farda: 'The initial capital required by the Central Bank is set at 4 billion tomans, which is a problem to secure. They also require a bank guarantee for 50% of this amount, which is another issue. We have not been able to secure it yet. We are among those who have submitted a letter stating that if we cannot secure it by August 28, we will be prevented from operating. We want to work. Our time and investment have been here for 7-8 years. We have about 5-6 employees. If we have to close down, they will definitely be unemployed, and we will incur losses on our investment and become unemployed ourselves. If it is according to the law, we must close and leave.' The minimum capital of 4 billion tomans may be the main reason for the lack of enthusiasm among traders for the Central Bank's new guidelines. Meanwhile, Hamid Tehranfar, the Central Bank's supervisory deputy, emphasized that the regulations for currency traders have been eased, stating that under previous regulations, traders were required to operate with 20 billion tomans, which has been reduced to 4 billion tomans in major cities like Tehran, Mashhad, and Isfahan, and to 2 billion tomans in other cities, marking a significant change in regulations aimed at facilitating operations and improving the business environment. Hassan Mansour, an economist residing in London, discussed the challenges of implementing the Central Bank's new guidelines, stating that in Iran, almost all currency collected belongs to the government, making it incomparable to countries with established financial markets. He noted that alongside the Central Bank and banks, there exists a large number of unauthorized financial institutions holding a significant portion of liquidity, approximately 300 trillion tomans. The government must organize these institutions; without this, the Central Bank's monetary policy actions will lose their effectiveness. The government has announced that the deadline has expired, and currency traders who do not meet the conditions must be shut down. If they are shut down, it will naturally create disorder in the currency market, meaning those who were previously authorized will not withdraw from the market but will conduct operations secretly, making market control quite difficult. Tehranfar reported that an average of 30 to 40 currency trader establishment cases are being reviewed daily, while emphasizing that the announced deadline is non-extendable. According to this Central Bank official, unauthorized traders will be subject to the regulations of the Anti-Currency Smuggling Law, and after the expiration of the license extension deadline, buying and selling currency by these traders will be considered a clear illegal act.