US sanctions against Iran have greatly affected the country’s economy. Restrictions on exports, imports and an almost complete embargo on the supply of oil from Iran forced the government to look for atypical methods of solving this problem. The way out of the situation was the mining of cryptocurrencies, which brings huge profits to the republic.
From this article, you will learn:
- How does mining help Iran avoid sanctions?
- Why has Iran begun mining cryptocurrencies?
- How much does the republic earn from cryptocurrency mining?
- Iran’s state cryptocurrency: creation goals and methods of use
How Does Mining Help Iran Avoid Sanctions?
The algorithm for circumventing sanctions has the following form:
Iran is one of the few countries with abundant oil reserves in the world. However, its export and use capabilities have been severely limited due to the almost complete oil export embargo that the United States has imposed on the country. This forced the government to turn to bitcoin mining as one of the potential tools for converting its energy reserves into a product from which the country can benefit.
Currently, more than 4.5% of the total global bitcoin volume is mined in Iran. In this regard, people pay 4.5% commissions to Iranian miners. It is worth noting that many participants in Bitcoin transactions, including those from the United States, transfer a commission to miners in Iran. Part of the income goes to the country’s budget, thereby strengthening its financial position.
Mining is equated to industrial production, and the country is popular among miners because of cheap electricity. In 2020, the Iranian authorities issued more than 1,000 licenses for cryptocurrency mining. There was even a report prepared by the Analytical Center under the President of Iran, according to which mining brings not only financial benefits but also contributes to employment growth and the development of the energy market.
“After four decades of assorted sanctions, the Iranian government has perfected a variety of techniques for evading sanctions, and crypto is certainly one of its tools,” Barbara Slavin, the director of the Future of Iran Initiative and a non-resident senior fellow at the Atlantic Council, told Arab News.
“Iran has increasingly utilized cryptocurrencies and crypto mining in recent years to evade US-imposed sanctions on its economy and to bolster domestic revenue, with some success,” said Ali Plucinski, a cybersecurity analyst for the risk intelligence company RANE.
Thus, Iran has an impressive pool of cryptocurrency liquidity, which allows the state to conduct transactions through various exchanges or directly, despite US sanctions. The authorities believe that mining is an excellent tool to support the development of the economy, so they are now making great efforts to develop this sector.
Why Has Iran Begun Mining Cryptocurrencies?
Diplomatic relations between the United States and Iran deteriorated as a result of the Islamic Revolution in 1979. America has repeatedly accused Iran of supporting terrorism and creating nuclear weapons, so the US government has imposed many sanctions against the republic.
For more than 40 years, many sanctions have been imposed on Iran, for example:
- A ban on the participation of enterprises in the oil and gas sector.
- Disconnecting from SWIFT.
- Restricting the export of many types of equipment.
- Prohibition of trade with the United States, and so on.
Iran’s oil export revenues decreased by more than 70%, which significantly hit the country’s economy. Sanctions have caused an increase in unemployment and periodic riots on the streets.
That is why the country’s authorities decided to use cryptocurrency mining to circumvent restrictions. In 2019, the Iranian government established a licensing system and began to encourage domestic mining by prohibiting the purchase of foreign cryptocurrencies while allowing the purchase of imported goods in exchange for bitcoin. In addition, the sale of cryptocurrencies to the Central Bank became available to miners. As a result, mining in the republic has become so popular that crypto farms have appeared even in mosques because of the free electricity.
Despite the benefits and volumes of cryptocurrency mining in the country, in June 2022 the Iranian government decided to disconnect mining companies from electricity supply. The Iranian ministry clarified that during the week, experts recorded the highest electricity consumption — 62.5 thousand MW at peak time. The authorities feared that these figures could exceed 63 thousand MW, which was the reason to restrict access to electricity.
These steps are necessary for Iran to restore the country’s energy system. The generators generated insufficient electricity in 2021, so the government has allocated time for restoration. The decree on limiting the supply of electricity to mining companies is temporary, so the owners of cryptocurrency farms continue to hope for the best.
How Much Does the Republic Earn From Cryptocurrency Mining?
According to the Cambridge Center for Alternative Finance and the statement of the Iranian Energy Company, miners consume more than 600 megawatts of electricity in this country, which requires about 10 million barrels of oil to produce. The republic turns oil into bitcoins, thus earning about 1 billion dollars a year.
In addition, in August 2022, Iran conducted its first international transaction using cryptocurrencies for the import of $10 million worth of goods. However, it remains unclear exactly which cryptocurrency was used for the operation. The Iranian authorities do not tell the details of the deal because it is not profitable for them. Despite this, the representative of the Ministry of Industry and Trade of Iran noted that by the end of September 2022, Iran intends to expand using of smart contracts and cryptocurrencies in foreign trade with “target countries”.
Iran’s State Cryptocurrency: Creation Goals and Methods of Use
The Iranian authorities have launched the gold-backed cryptocurrency PayMon to circumvent international sanctions. The banks Parsian, Pasargad, Melli and Mellat worked on the issue of altcoin. The asset will be presented on the Fara Bourse platform.
The main goals of PayMon’s creation are:
- Tokenization of bank assets and excess property;
- Reducing the negative consequences for the country’s economy after disconnecting from the SWIFT system.
According to Valiolla Fatemi, director of Ghoghnoos, 1 billion new tokens will be issued initially. Paymon will be released in stages. At first, the cryptocurrency will be available only to Iranian institutions and banks that intend to use it in payments. Then even individuals will be able to use cryptocurrency to purchase various goods and services within the country.
Iran’s economy has suffered severely after the sanctions imposed by the United States. Limiting the export of oil and other goods reduced the country’s income, but the government managed to find a successful alternative in the form of mining. Despite the restrictions, the cryptocurrency helps the republic use its oil reserves and earn money on them.
Does Iran have crypto?
Iran has its own token called PayMon, which helps to avoid sanctions and tokenize the country’s assets. In addition, Iran plans to launch a “digital rial”, thanks to which many important economic problems will be solved.
Which crypto does Iran use?
In 2022, the Iranian government approved the use of cryptocurrencies for imports as a measure to circumvent sanctions. One of the key tokens in the trading system is Bitcoin.
Can you buy crypto in Iran?
Yes, of course! The Nobitex crypto exchange gives users the opportunity to purchase cryptocurrency at market value for rials.