Cryptocurrency in Global South Trade: The Iran Case Study Analysis | COGGS Intern | Read Now|

Vericko Dhuha Zahir Negara, COGGS Intern

[Abstract : This research looks at how cryptocurrency’s role is becoming more important as an alternative in international trade, especially for countries that are not well-supported by the usual global financial system. As the SWIFT network is being used more often as a tool for political reasons to apply sanctions and control economies, many countries particularly in the Global South are looking for alternative solutions. Cryptocurrency, which is based on blockchain technology, allows people to send money directly to each other without needing banks. This reduces reliance on traditional financial institutions, cuts down on costs, and makes it easier to send money across borders quickly. Using the World-Systems Theory and the concept of Decentralized Finance, this study shows how blockchain-based currencies give countries like Iran more control and stability by helping them avoid sanctions and manage their economy better. The research used a qualitative-descriptive approach, looking at information from academic papers, news articles, and reports from organizations to spot trends. The results show that cryptocurrency’s role helps trade happen in ways that traditional systems don’t allow, and it changes how global economics works by being a clear, fast, and politically neutral option compared to conventional systems. ]

INTERNATIONAL TRADE IS an important aspect for a nation to increase its economic growth. One of the biggest elements of international trade is the Society for Worldwide Interbank Financial Telecommunication also known as SWIFT, which has been the backbone of banks from various nations. However, SWIFT is not a neutral system; it has been used as an international political tool in the form of sanctions and other economic limitations (Cipriani et al., 2023). SWIFT works as a safe communication provider between banks, because of that almost any transnational currency operates under SWIFT. As a result, anytime when a nation or company has limited actions by SWIFT it can result in an economic crisis or a bankruptcy. This phenomenon of economic limitations has increased over time due to SWIFT not being a neutral system. SWIFT has increasingly become a political control tool to give sanction and limit any country’s economic activities if that country is considered a threat. This results in cost issues and regulatory restrictions that blocks developing countries from reaching not only western market but also the global market to gain a higher profit. For example, most Global South nations are submitted to this system which creates unequal dependency and makes them

vulnerable to sanction and other political-economic pressure. For that reason, many nations and companies tried to find a way to do international trade without relying on SWIFT’s system. This led them to blockchain technology, which uses cryptocurrency that was invented by an unknown individual called Satoshi Nakamoto back in 2009. Blockchain eliminates the needs of banks correspondent, documents, and time needed. Cryptocurrency offers real-time transaction or remittance, low cost, and direct access from buyer to seller without relying on banks.

Theoretical Framework

This research was conducted using the World-System theory as a way of understanding the world as a hierarchically structured capitalist system, with a dominant core and an exploited periphery (Wallerstein, 2004). According to Wallerstein, the capitalist world system began around the 16th century in Europe, through colonial expansion, international trade, and the formation of modern nation-states. Since then, this system has continued to develop into a global system with one hegemony that switches over time. World-systems theory supports an interdisciplinary approach by integrating historical, political, economic, and cultural analysis within a measured framework. On top of that, this research will also apply the Decentralized Finance (DeFi) concept. DeFi is a new model in the finance world that utilizes blockchain technology and smart contracts to provide financial services without intermediaries like banks (Zetzsche et al., 2020). This technology allows users to access financial services by peer-to-peer with just the internet and digital wallet. DeFi allows users to avoid traditional or conventional ways of international transaction or remittance which is more costly and time-consuming. As a whole, DeFi is a model that changes how transnational finance activities work.

Methods

Every data was collected through in-depth literature studies, news articles, academic publications, and any documents related to blockchain, cryptocurrency, and SWIFT. On top of that, data analysis was carried out by identifying patterns, themes, and narratives that emerged from the collected data, which were then interpreted. This approach allows the author to describe things in detail while keeping it concise. In addition, the qualitative-descriptive method enables the author to remain adaptable to the different matters of the subject regarding international trade. This method aims to provide understanding of the dynamics of the phenomenon being studied.

The  Case of Iran 

Global South countries’ challenges are often stacked on top of another with systemic issues, international actors interfering, lack of facilities or technology, and internal economic issues. This creates a demand for trusted and self-custodial currency which led to digital coin using Blockchain technology (Böhmecke-Schwafert & Moreno, 2023). Cryptocurrency and blockchain offer faster, cheaper, and more accessible cross-border transactions, such as remittances and trade, while avoiding international restrictions. Due to many Global South countries facing both internal and external trade challenges, this pushes them to switch to a currency that can avoid those challenges. The implementation of Blockchain in the Global South can improve the Global South’s position and profit as a raw material supplier within the global supply chain, rather than being limited by conventional trade systems. Blockchain’s transparency and traceability facilitate Global South in international trade especially for agriculture and natural resources (Eliason, 2022). Even with the risk of being hacked and losing digital coins, the trend of utilizing cryptocurrency is not slowing down, instead it creates other ways to store digital coins such as using cold wallets. Global south countries develop domestically controlled blockchain and support cryptocurrency legal matters to increase digital currency exposure and trust around the world. On top of that, blockchain and cryptocurrency should also support local manufacturers, SMEs, cross-border trade, and remittances among Global South citizens (Eliason, 2022).

Since the United States withdrew from the JCPOA nuclear deal in 2018, Iran has been re-imposed on \economic sanctions. These sanctions primarily target Iran’s oil sector and financial system. As a result, Iran’s currency exchange rate has plummeted, while inflation has sky-rocketed. In this economic state, both the Iranian government and civilians have begun seeking alternative, more stable stores of value and exchange rates. One widely used solution is cryptocurrency. There are several key reasons why crypto has become so attractive to Iran. First, cryptocurrencies are used as a hedge against inflation and currency devaluation. Many Iranians store their wealth in crypto, which is considered more stable than conventional currencies. Second, cryptocurrency allows the government and businesses to evade international sanctions, particularly from the US. Since 2019, the government has officially supported Bitcoin mining, taking advantage of cheap domestic electricity. On top of that, Iran uses crypto as a digital currency for export commodities. In August 2022, Iran began using crypto directly to pay for imports. The government is also exploring the use of gold-backed digital coins with Russia to strengthen bilateral transactions and avoid the US dollar and SWIFT. This move by Iran sparked a response from the international community. The US government expanded its list of sanctioned entities, including companies in the United Arab Emirates, Turkey, and Hong Kong that help Iran sell oil and launder money through crypto. The US Treasury Department has also increased cooperation with blockchain intelligence agencies to track suspicious transactions. However, the effectiveness of this law enforcement remains limited as Iran actively seeks new ways to evade detection, including through anonymous decentralized finance protocols. Because of that, International policy needs to be more integrated to both support cryptocurrency as an alternative for international relations actors to have a new trade system that is operated under blockchain technology.

Conclusion

Cryptocurrency has caused a big shift in how countries trade internationally, especially for those facing difficulties in the current global financial system. SWIFT, which is a system that has been used a lot in international banking, is sometimes controlled by politics and can limit certain countries from accessing the global market, especially those in the Global South. Cryptocurrency offers a different way for these countries to take part in the economy. It works through blockchain technology, which doesn’t need third parties like banks. This makes transactions faster, cheaper, and more open. This is especially helpful for countries that are under sanctions or facing financial limits, like Iran. Cryptocurrency also helps more people and businesses around the world to take part in financial activities. With decentralized finance, people can connect directly with others without needing traditional banks. This is especially useful for small businesses and even governments. On top of that, blockchain’s ability to track transactions helps in areas like farming and exporting raw materials, which are important for many countries in the Global South. This makes their role in global trade stronger. Though there are risks like hacking and unclear rules, more people are using cryptocurrency, showing how important it is. In the end, cryptocurrency is a brand new technology that gives people more control over their money and challenges the conventional financial systems. It creates new paths for trade that are fairer, more open, and not controlled by political power or banks.

[ Vericko Dhuha Zahir Negara is a COGGS Intern and Student at International Relations
Faculty of Social and Political Sciences National Development, University “Veteran” of East Java, Surabaya, Indonesia]

References

1. Marco Cipriani, Linda S. Goldberg, & Gabriele La Spada (2023). Financial Sanctions, SWIFT, and the Architecture of the International Payment System.
2. Slatvinska Valeria, Demchenko Vitaliia, Tretiak Kateryna, Hnatyuk Rostyslav, & Yarema Oleg (2022). The Impact of Blockchain Technology on International Trade and Financial Business. DOI:10.13189/ujaf.2022.100111
3. Patrick Schueffel (2021). DeFi: Decentralized Finance- An Introduction and Overview
4. Dirk A. Zetzsche, DouglasW.Arner, & Ross P. Buckley (2020). Decentralized Finance
5. Immanuel Wallerstein (2004). World-System Analysis An Introduction.
6. Rose Mahdavieh (2022). State Adoption of Cryptocurrency: a Case Study Analysis of Iran, Russia, and Venezuela.

7. Moritz Böhmecke-Schwafert & Eduardo García Moreno (2023). Exploring Blockchain-based Innovations for Economic and Sustainable Development in the GlobalSouth: A Mixed-Method Approach based on Web Mining and Topic Modeling.

8. Antonia Eliason (2022). BLOCKCHAIN, TRADE, AND THE GLOBAL SOUTH:

ENTRENCHING SUPPLY CHAIN ROLES.

9. Reuter (2025). S. issues additional Iran-related sanctions, Treasury website shows.
10. Arab News (2022). How Iran is cashing in on cryptocurrencies to evade US sanctions.