I like to say that the Earth has three poles: North, South and Washington. The US maintains its monetary superiority through the dollar, while legal instruments like Fatca – a US law requiring foreign financial institutions to report on assets they hold on behalf of Americans – serve to further centralise the dollar by making sure that everything is closely monitored. Because of this global reach, American sanctions often spell the death of budding economies.
How, then, has Iran’s ruling regime managed to last when for so long it has found itself at odds with the US and subject to US sanctions? It continues to project its own influence outside of its borders by funding various proxy groups. It supports the Hezbollah militant political party in Lebanon, the Houthi rebels of Yemen and the vassalage of Iraq through various militias holding the government hostage. Sponsoring groups like these is an expensive endeavour, even for prospering nations. Iran, a nation besieged economically, is pursuing these interests successfully. So how does it bypass US sanctions?
Iran’s government is an intelligent and tenacious state actor, capable of defining and pursuing its interests competently. It also maintains an infinite interest in sustaining its previous foreign investments, including Hezbollah and the Houthis, indefinitely, by whatever means necessary. Like any state, once faced with difficulties, Tehran can be trusted to adopt solutions and strategies that mitigate these difficulties. Furthermore, the level of state secrecy and intrigue that pervades Iran makes gathering hard evidence nigh on impossible.
But it is possible to get a sense of the Iranian strategy to sustain itself purely through a little mathematical intuition. If I, a relatively unaffected author, can conjure up a way for Iran to effectively bypass US sanctions, then it is likely that Iran, given the pressure it faces, has already been doing that for some time and has even become good at it.
How does an entity under sanction continuously supply its proxies with fresh US dollars? How does it maintain US dollar liquidity? The answer might surprise many. It is Bitcoin, the world’s most prolific cryptocurrency.
Bitcoin’s unique properties like anonymity, security, portability, and decentralisation help secure Iran’s assets from American surveillance and sabotage. Bitcoin’s fungibility in turn is a great boon to Iran’s worldwide operations; any amount of Bitcoin can easily be exchanged for dollars (or any other currency) relatively easily.
The reality is that the Iranian economy has been suffering a great deal in recent years, putting a strain on its funding for Hezbollah. This has caused the militant group to turn to other means to fund itself, namely the international drug trade and money laundering.
Despite Hezbollah's denial of its involvement in these things (which it claims would go against its supposedly devout principles), there is little room for doubt that it does indeed run a massive global trafficking ring with the help of some in the Lebanese diaspora. In fact, it has been reported widely that Iran encourages Hezbollah to engage in this trade. After all, the extension of Hezbollah's illicit activities to South America was an integral mechanism through which Tehran cemented its alliance with the government of Nicolas Maduro in Venezuela.
Hezbollah maintains a global network of operatives, primarily in the US and Europe, along with a sizeable standing army at home in Lebanon. All of this requires serious amounts of cash flow. For the reasons outlined earlier, Bitcoin provides an easy solution to all of their liquidity problems.
Venezuela and Iran both maintain vast Bitcoin mining sectors, easing the ability to denominate transactions between them in the cryptocurrency. Unlike the Iranian rial or the Venezuelan bolivar, both of which have experienced unstable levels of inflation, Bitcoin has value everywhere. Moreover, it is is a secure and appreciating asset; anyone following cryptocurrency news can see how rapidly its value has risen, making it a great hedge against the rapidly depreciating Iranian rial.
Bitcoin is also decentralised and cannot be manipulated in any direct way by the US Treasury or other regulatory authorities. Bitcoin, by its very nature, does not recognise the terms “sanction” or “regulation”.
It is also – and this is crucial – anonymous. This means that even sanctioned individuals can engage in transactions via Bitcoin because there is no link between a cryptocurrency “wallet” (the virtual means of storing one’s cryptocurrency assets) and its owner.
Furthermore, sending large amounts of money through the Bitcoin network is incredibly easy – almost instantaneous, actually – and peer-to-peer. Since one person can own multiple wallets, the true amount of Bitcoin owned and operated by a government such as Iran’s can be masked so as to avoid suspicion. This, in and of itself, could sustain Iran’s operatives in the West. While the US dollar may have to pass through three banks before finally reaching its destination, Bitcoin is disbursed in a way similar to a cash handout.
Even sanctioned individuals can engage in transactions via Bitcoin because there is no link between a "wallet" and its owner
Even a small amount of Bitcoin would have been enough for Iran and its operatives to kickstart operations, largely thanks to its value having skyrocketed recently because of an ongoing rush on it by investors. In fact, the direct links between Hezbollah and Bitcoin have already become apparent to law enforcement agencies. Last summer, the US Department of Justice extradited two men from Cyprus – a Bitcoin thief and a Hezbollah narcotics operative.
Bitcoin has already witnessed a remarkably high adoption rate among the public in Iran, where mining it has proven to be especially lucrative because of subsidies on electricity. A study of 1,650 Iranians has revealed that some earn upwards of $3,000 per month from cryptocurrency activities. Sweden has agreed to invest in the Iranian stock market with Bitcoin, and Russia has invested in Iran's blockchain technology infrastructure. Bitcoin has seen such a massive adoption rate in Iran that it has even entered legislation. It is now legal to import goods into Iran using Bitcoin, and the mining of Bitcoin using subsidised energy is strictly regulated by Iran's Ministry of Energy. According to the New York Times, Iran and Venezuela are attempting to launch their own cryptocurrencies.
As Tanvi Ratna, a blockchain expert writing in Foreign Policy magazine, puts it: "Iran has clearly understood that cryptocurrencies are among the ways to challenge and subvert the US-dominated financial architecture."
The unipolar global political order has been fraying at the seams as much as the economic order, as nations look for whatever means they can outside of established, regulated systems to assert their dominance. Bitcoin will become indispensable in the future by ensuring a parallel global monetary architecture, for nations and private entities alike. If Iran and Hezbollah are not yet using Bitcoin to bypass the US, then they would be much further behind than all of the incentives and available evidence suggest. And if they are, then others are certainly following suit.
This article is adapted from a paper originally published in the Lebanon Law Review.
Antoine Kanaan is editor-in-chief of the Lebanon Law Review
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Other ways to buy used products in the UAE
UAE insurance firm Al Wathba National Insurance Company (AWNIC) last year launched an e-commerce website with a facility enabling users to buy car wrecks.
Bidders and potential buyers register on the online salvage car auction portal to view vehicles, review condition reports, or arrange physical surveys, and then start bidding for motors they plan to restore or harvest for parts.
Physical salvage car auctions are a common method for insurers around the world to move on heavily damaged vehicles, but AWNIC is one of the few UAE insurers to offer such services online.
For cars and less sizeable items such as bicycles and furniture, Dubizzle is arguably the best-known marketplace for pre-loved.
Founded in 2005, in recent years it has been joined by a plethora of Facebook community pages for shifting used goods, including Abu Dhabi Marketplace, Flea Market UAE and Arabian Ranches Souq Market while sites such as The Luxury Closet and Riot deal largely in second-hand fashion.
At the high-end of the pre-used spectrum, resellers such as Timepiece360.ae, WatchBox Middle East and Watches Market Dubai deal in authenticated second-hand luxury timepieces from brands such as Rolex, Hublot and Tag Heuer, with a warranty.
UPI facts
More than 2.2 million Indian tourists arrived in UAE in 2023
More than 3.5 million Indians reside in UAE
Indian tourists can make purchases in UAE using rupee accounts in India through QR-code-based UPI real-time payment systems
Indian residents in UAE can use their non-resident NRO and NRE accounts held in Indian banks linked to a UAE mobile number for UPI transactions
Best Foreign Language Film nominees
Capernaum (Lebanon)
Cold War (Poland)
Never Look Away (Germany)
Roma (Mexico)
Shoplifters (Japan)
UAE currency: the story behind the money in your pockets
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Five famous companies founded by teens
There are numerous success stories of teen businesses that were created in college dorm rooms and other modest circumstances. Below are some of the most recognisable names in the industry:
- Facebook: Mark Zuckerberg and his friends started Facebook when he was a 19-year-old Harvard undergraduate.
- Dell: When Michael Dell was an undergraduate student at Texas University in 1984, he started upgrading computers for profit. He starting working full-time on his business when he was 19. Eventually, his company became the Dell Computer Corporation and then Dell Inc.
- Subway: Fred DeLuca opened the first Subway restaurant when he was 17. In 1965, Mr DeLuca needed extra money for college, so he decided to open his own business. Peter Buck, a family friend, lent him $1,000 and together, they opened Pete’s Super Submarines. A few years later, the company was rebranded and called Subway.
- Mashable: In 2005, Pete Cashmore created Mashable in Scotland when he was a teenager. The site was then a technology blog. Over the next few decades, Mr Cashmore has turned Mashable into a global media company.
- Oculus VR: Palmer Luckey founded Oculus VR in June 2012, when he was 19. In August that year, Oculus launched its Kickstarter campaign and raised more than $1 million in three days. Facebook bought Oculus for $2 billion two years later.
Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.
Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.
“Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.
Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.
“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.
Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.
From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.
Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.
BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.
Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.
Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.
“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.
Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.
“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.
“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”
The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”
