Iran has launched a new Bitcoin-backed insurance service aimed at shipping companies in the country that want to operate in the Strait of Hormuz, according to the semi-official Fars news agency, which cited documents fr...
Iran has launched a new Bitcoin-backed insurance service aimed at shipping companies in the country that want to operate in the Strait of Hormuz, according to the semi-official Fars news agency, which cited documents from the Ministry of Economy and Financial Affairs.
The service, called Hormuz Safe, promises "fast, verifiable digital insurance" for Iranian shipping companies and cargo owners, as seen on a screenshot of its website shared by Fars. However, Fars did not clarify how the insurance operates or if it is open to foreign shipping companies.
Iran has faced heavy sanctions from the US, and since former President Donald Trump began targeting its economy and energy exports, the use of cryptocurrencies like Bitcoin and Tether has surged.
Since February 28, when the US and Israel started airstrikes against Iran, Iran has effectively closed the Strait of Hormuz, a key route for global energy supplies. The government and the Islamic Revolutionary Guard Corps (IRGC) have been working to take formal control of the waterway, possibly through tolls and other fees. This new insurance service may be another way to generate revenue.
"Cryptographically verifiable insurance policies will be provided for shipments passing through the Persian Gulf, the Strait of Hormuz, and surrounding waterways, with payments settled in Bitcoin," Fars reported, referring to the website hormuzsafe.ir, which seems inaccessible outside of Iran. "The shipment will be insured from the moment of confirmation, and a signed receipt will be given to the owner."
However, establishing a Bitcoin-based insurance system for shipping may face challenges. Bitcoin is highly volatile compared to stablecoins, which are pegged to stable currencies like the dollar. This volatility has limited its use as a payment method. Additionally, foreign ship owners might be reluctant to engage with such a system due to concerns about violating US sanctions against Iran.
Uneasy Ceasefire
Since early April, there has been an uneasy ceasefire between the US and Iran, and resolving issues over the Strait of Hormuz is crucial for any peace agreement.
Recently, Trump issued a warning to Iran, telling them they needed to "get moving, FAST, or there won't be anything left of them," according to a post on Truth Social. Both sides have repeatedly rejected each other's demands, hindering peace talks.
With the stalemate ongoing, over 1,500 commercial vessels were stuck in the Persian Gulf as of early May, as reported by the US military. Oil producers in the region have had to cut their output due to a lack of storage space for crude oil.
The Iranian government and the IRGC have allowed some ships to pass through a designated route near Iran's coast, often requiring payments of up to $2 million. In response, the US has blockaded Iranian ports.
Iran's Supreme National Security Council recently established the Persian Gulf Strait Authority to oversee traffic in the Strait of Hormuz. This body is described as the "legal entity and representative authority of the Islamic Republic of Iran for managing traffic in the Strait of Hormuz."
It's unclear how closely the Hormuz Safe insurance service is linked to the IRGC or the government's broader toll system goals. Fars news has strong connections to the IRGC.
Babak Zanjani, an Iranian businessman known for helping Iran evade sanctions, proposed the idea of a shipping insurance scheme for the Strait of Hormuz on May 8. Zanjani was released from prison last year after his death sentence was reduced and had previously been convicted of embezzling billions from Iran's oil ministry.
Reports about Hormuz Safe coincided with a statement from an Iranian lawmaker about an upcoming professional mechanism to manage traffic in the strait along a designated route.
Ebrahim Azizi, head of Iran's parliamentary commission for national security, mentioned, "only commercial vessels and parties cooperating with Iran will benefit." He added that fees would be charged for services under this new system and that those involved in the US-Israeli campaign against Iran would be barred from using the route.
Esmail Baghaei, spokesman for Iran's foreign ministry, stated that Iranian and Omani officials met last week to discuss ways to ensure safe passage for vessels in the Strait.