Iran, sanctions and bitcoin

There is a lot going on in Iran regarding bitcoin and cryptocurrency.

Recently, members of the Iranian Economic Commission announced that they would present new measures to the cabinet regarding the mining of cryptocurrencies such as bitcoin. Due to the low energy rates that apply thanks to government subsidies, the country is reportedly struggling with an abundance of bitcoin miners.

Electricity consumption in Iran would have increased significantly as a result. However, according to the Iranian energy minister Homayoun Haeri, the subsidies are not intended for that and higher rates should apply to miners. Meanwhile, authorities have confiscated some 1,000 bitcoin miners and other mining operations risk being shut down when discovered from the power grid pending new rules.

Some of the miners would then have sought refuge in the Mosques, where the electricity is even completely free and where they may be less visible to the authorities.

It is not an easy time for Iranian bitcoin traders, except for the miners. A deputy governor of the Iranian central bank recently emphasized that buying or selling bitcoin is prohibited in Iran. It is therefore not easy for Iranians to get hold of bitcoins today. They are banned by most exchanges and even would have stopped serving Iran. According to the graph below from, the actual trade in bitcoins does not seem to care much about this.

Mining is perhaps one of the easier and less risky ways to obtain cryptocurrencies in Iran right now. In an abstract sense, mining for bitcoins is perhaps not very different from purchasing bitcoins. Energy is spent instead of money. And that also costs money.

An additional advantage is that mining has no identity checks, nor gatekeepers that can deny access. As long as the power consumption is not noticeable, it also offers a reasonable degree of privacy.

Iranian government interested in cryptocurrency

Despite the strict crackdown, the Iranian government is not strongly opposed to the idea of cryptocurrency and mining. Elyas Hazrati, head of the Economic Commission, pointed out that the new rules also provide some official recognition for the crypto industry.

to circumvent the many sanctions against the country. President Trump announced additional sanctions against Iran a month ago.

Iran even has plans for a central bank-approved Iranian crypto coin backed by gold. That should become a resource for Iranian banks that are now struggling with frozen funds. This is very similar to a similar initiative by Venezuela, which launched its own crypto coin called Petro for similar motives.

To date, the Petro seems to be getting very little off the ground. It is also perhaps not surprising that there is little interest in a crypto currency that is mainly aimed at guaranteeing a questionable state for a certain amount of raw materials that they may have at their disposal.

And although the intention is to circumvent sanctions with the Petro, the opposite happened. President Trump simply imposed sanctions on the Venezuelan crypto currency last year. Anyone who comes into contact with the Petro in any way since then risks incurring the wrath of the United States. Plans to impose sanctions are already circulating for the Iranian crypto currency.

Circumventing sanctions is more difficult than it seems

It is also questionable whether a cryptocurrency of its own is the remedy against sanctions that these types of countries hope for. A transaction on a blockchain may be resistant to censorship, but conversion to other currencies or goods is sometimes problematic. That conversion is often necessary because many costs incurred cannot be paid with crypto currency.

There is usually no extensive economy in which the cryptocurrency in question can be spent, and the demand on the free market is therefore usually limited. There is often insufficient liquidity to convert large amounts. After all, even in the case of bitcoin, by far the largest cryptocurrency with the most developed economy, there are only a limited number of buyers to be found at any given time.

It may be quite possible to sell them several million euros worth of bitcoins without this having too much effect. However, when it comes to billions, a shortage of buyers can quickly cause the price to fall, which can cause a lot of value to be lost.

Countries that are subject to sanctions are also often banned from exchanges and other trading venues, which means that the liquidity to which they have access is all the smaller. For larger amounts, and therefore for states, the usefulness of cryptocurrencies to circumvent sanctions is, for the time being, fairly limited, the Iranian minister of ICT recently stated.

“Cybercurrencies are effective in bypassing sanctions when it comes to small transactions, but we do not see any special impact in them as far as mega-transactions are concerned… We cannot use them to go around international monetary mechanisms.” – Mohammad Javad Azari Jahromi, Minister of ICT, Iran

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