The Central Bank of Iran has officially prohibited all financial institutions, including banks and credit institutions, from handling cryptocurrencies.
According to a statement published on CBI's official website on Sunday, the decision to ban all monetary and financial institutions from using Bitcoin and other cryptocurrencies was taken during the 30th meeting of the High Council of Anti-Money Laundering on Dec. 30, 2017.
The CBI decision is rooted in cryptocurrencies' shadier side and Iran's drive to adhere to global standards on transparency in financial transactions.
"Since a variety of virtual currencies have the capability of becoming instruments for money laundering and financing terrorism, as well as means of transferring the money of criminals, the supervisory entity of the central bank has notified the ban on employing virtual currencies to banks to prevent the occurrence of any crime," the CBI statement said.
Iran has been boosting efforts to address its AML/CFT deficiencies in recent months to comply with the action plan of Financial Action Task Force, the intergovernmental standard-setting organization that will take its next decision about the country during its upcoming plenary meeting in June.
In addition to all branches and affiliated units of banks and credit institutions, the ban also obligates money exchangers to refrain from "any measures that will facilitate or promote virtual currencies", in addition to buying or selling them.
However, even as a host of uncertified and underground moneychangers deal with Bitcoin and other virtual currencies, CBI-certified money exchangers did not previously have the authority to use cryptocurrencies.
"Foreign exchange transactions are not handled electronically and online in any Iranian exchange shops, because the related directive passed by the [top financial decision-making body] Money and Credit Council does not give them such a permit," Saeid Mojtahedi, the head of the Iranian Association of Moneychangers, had said in Dec. 2017.
Prior to the directive published on Sunday, the central bank had not prohibited the use of cryptocurrencies by law and only sought to warn people of the potential risks.
CBI Governor Valiollah Seif made his first public comments on Bitcoin on Dec. 30, at a time when the currency's meteoric rise had taken the world by surprise and urged Iranian investors to exercise caution in trading cryptocurrencies while adding that "CBI is striving to bring about relative security to [Bitcoin trading]".
Earlier, CBI's deputy for innovative technologies, Nasser Hakimi, had noted that Bitcoin and other cryptocurrencies have not been introduced by CBI as official currencies in light of the high risk and speculative activities associated with them.
"We ask investors and the public to enter this field with increased caution because they could lose their money," he said.
CBI is set to release a regulatory framework document on cryptocurrencies by the end of the first half of the current fiscal year in September and the recent directive is aimed at preparing the ground for the same.
In its statement on Sunday, the central regulator also warned all potential violators that they will be met with disciplinary action "based on related rules and regulations".
The ban comes amid a slew of similar recent bans from Iran's neighbors, India and Pakistan. About three weeks ago, India's central bank barred banks from having any links with virtual currency dealers while Pakistan's central bank said outright that crpytocurrencies are not legal in the country.