The App Destroying Iran’s Currency

Iranian President Hassan Rouhani owes his re-election in large part to the messaging app Telegram. During Iran’s 2017 presidential election, Iranians relied on the app as a rare source of uncensored news about the race, in which Rouhani was not the candidate most favored by hard-liners.

Just one year later, Telegram may end up becoming Rouhani’s downfall. The app is at the center of Iran’s accelerating currency crash.

The Iranian rial was generally acknowledged to have been on a stable path until May, when U.S. President Donald Trump exited the Iran nuclear deal. Prior to the U.S. withdrawal, one U.S. dollar was worth around 37,000 rials; immediately afterwards, a single dollar jumped to around 44,000 rials. The rial has continued to slump ever since, dropping to 50,000 to the dollar, and then 80,000 rials, and then 190,000 during Rouhani’s speech at the United Nations General Assembly in September. Right now, it is at 120,500 rials.

But it isn’t just U.S. sanctions and the fundamental weaknesses of the Iranian economy that have contributed to Iran’s currency freefall. It’s also the deliberate circulation of rumors and fake news on Telegram by Iranian currency traders and middlemen out to make a profit.

As soon as it became clear that the United States would reimpose sanctions, many middle-class and wealthy Iranians felt a temptation to engage in currency trading, having concluded that the value of the rial would soon decline. For all these Iranians, the goal was to buy dollars. Some Iranians even sold their homes and invested the proceeds in dollars to preserve the value of their assets—or, simply, to secure a profit.

The fire sale of Iranian rials weakened the rial even further, and the Iranian government tried to arrest it in various ways, including by banning the official sale of foreign currency. But this only served to make the currency-trading market less transparent—and, correspondingly, more exploitative.

There has always been a gap between the more sophisticated currency traders and those driven by ignorance and fear, but the informal marketplace widened it. That has become especially evident on Tehran’s Ferdowsi Boulevard, the center of Iran’s informal money-changing economy, where anyone can bring rials in cash and walk away with U.S. bills.

In one instance on Ferdowsi, I recall seeing one elderly women bring the equivalent of her entirely yearly income and exchange it at a rate of 170,000 rials to the dollar—an offer significantly below what the rial was then worth, even as the consensus was that the currency was probably undervalued at that moment. The rial has yet to weaken to the point that the woman’s bet would have paid off.

Iran’s professional money traders increasingly use Telegram to exploit the black market’s lack of transparency to maximize their own profits, at the expense of their Iranian clients—and to the distress of the Iranian government. As one of the few social media or messaging apps that the Iranian government doesn’t censor, Telegram—specifically, the news feeds on its “channel” function, which allow posts to be distributed to anyone who chooses to sign up for them—has become one of the most trusted sources of news for Iranians, displacing state media and even ostensibly independent newspapers.

When the rial entered its ominous trajectory earlier this year, currency traders began creating hundreds of channels on Telegram, instantly announcing any shifts in the dollar price and offering broader market and purchasing advice for the coming days. Iranians have joined these channels in such large number—some feeds have more than 2 million members—that they have themselves become a force capable of influencing the currency exchange rate.

The currency traders who run these information outposts are increasingly using them to distribute distorted economic news. For example, in recent weeks, as the rial began to regain value, the currency-trading Telegram channels resisted the positive news. Some simply delayed reporting the rising prices; others even announced entirely false prices. Many of the channels also ignored the positive trends in favor of promoting negative analyses about the negative effects of U.S. oil sanctions on Iranian currency.

Iran’s official news media, for their part, attempted to counteract these false reports by emphasizing the recent arrival of positive news about the future of the rial and explicitly calling out the false reports on Telegram. But many ordinary Iranians have been unsure of how to respond to the contradictory news reports and have held on to the dollars they previously bought rather than sell them for rials, as the most recent data suggested they ought to.

Recently, new Telegram channels have arisen that seem designed specifically to push back against the popular channels created by the currency traders. One of the new channels is called “Dollar-Rial” and seems to have the explicit goal of supporting a strong rial while attacking currency middlemen as traitors and meddling foreigners. This channel has also succeeded in attracting over 2 million members, which suggests Iranian society may have grown exasperated with the perceived manipulation of Iran’s currency market by self-interested actors. (The channel was recently blocked for unknown reasons, after which its creators launched a new channel that now has 55,000 members.)

The Iranian government is trying any measures at its disposal to prop up the rial’s value. According to the analyses of a number of Iranian economists, the economic fundamentals suggest that the dollar should trade at around 80,000 to 90,000 rial. This happens to be the level at which the online foreign exchange system NIMA—where currency traders, as well as major exporters and importers, make bulk transactions—tends to value the rial. The Central Bank’s most recent policy was to limit the use of rial-denominated debit cards, which currency traders have been using to purchase large sums of dollars.

But the fact that the rial is frequently valued more cheaply than it should be in Iran is the result of speculative factors, including the psychological effects of propaganda, whether the U.S. government’s or those of Iran’s Telegram channels. Iranian officials have understood this for a while—but, until now, they have yet to consistently distribute information that’s as effective as the fake news produced by their adversaries.