Iran Turns to Bitcoin Strategy to Dodge US Sanctions

US sanctions have accelerated Iran’s use of cryptocurrencies such as bitcoin. (Reuters)
US sanctions have accelerated Iran’s use of cryptocurrencies such as bitcoin. (Reuters)
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Iran Turns to Bitcoin Strategy to Dodge US Sanctions

US sanctions have accelerated Iran’s use of cryptocurrencies such as bitcoin. (Reuters)
US sanctions have accelerated Iran’s use of cryptocurrencies such as bitcoin. (Reuters)

In narrow terms, the economic sanctions imposed by the United States on Iran in the last two years have been effective, shrinking the Iranian economy by 10 to 20 percent. But they have also accelerated Iran’s use of cryptocurrencies such as bitcoin, which are increasingly used by the Iranian government and public to evade legal barriers. This has led to an attempted crackdown on bitcoin by international regulators—but the cryptocurrency industry is proving more nimble than the enforcers of sanctions, reported Foreign Policy.

The Iranian government has long had an interest in using cryptocurrencies to support international trade outside of the traditional banking system. In July 2018, President Hassan Rouhani’s administration declared its intention of launching a national cryptocurrency.

One month later, a news agency affiliated with the Central Bank of Iran outlined multiple features of the national cryptocurrency, stating that it would be backed by the rial—Iran’s national currency.

Multiple blockchain projects—developing the underlying technology for cryptocurrencies—were revealed by the central bank at a digital payments conference last year, one of which is reportedly already being tested by four Iranian banks (three of which are under sanctions).

Cryptocurrency transactions are already popular with the Iranian public, according to various reports. In some interviews, people have described bitcoin as the only way to get money out of Iran.

Cryptocurrency mining activity, which is a heavy computational process that generates, or “mines,” new cryptocurrency, is also significant in Iran.

Lured by the cheap cost of electricity in the country, and the devaluation of the Iranian rial, several bitcoin miners set up operations in Iran in 2018. In 2019, a survey conducted with 1,650 Iranians using bitcoin showed that 25 percent of respondents made $500 to $3,000 per month working with cryptocurrency.

The Iranian government also appears to have recognized the value in mining as an economic sector. In August 2019, after a month of harsh crackdowns on mining activity for abusing cheap electricity, the cabinet issued a regulation that recognized mining as a legal sector in the economy.

Interestingly, Iran also appears to have attracted interest from other countries willing to collaborate via blockchain platforms.

In 2017, Sweden reportedly authorized a local start-up to invest in firms on the Iranian stock market by using bitcoin. In November 2018, Iranian and Russian blockchain industry personnel signed an agreement for cooperation in developing Iran’s blockchain industry, with a stated aim to address challenges arising from sanctions. In 2019, Iran’s Trade Promotion Organization conducted negotiations on the use of cryptocurrencies in financial transactions with representatives of eight countries, including Switzerland, South Africa, France, England, Russia, Austria, Germany and Bosnia-Herzegovina.

In 2016, as per the Iran nuclear deal, the United Nations and European Union lifted sanctions on Iran. The EU recently launched Instex, a transactions channel between Europe and Iran.

Multiple obstacles still exist, however, before Iran can fully harness the power of cryptocurrencies. The room for anonymity is steadily shrinking for cryptocurrency transactions as formal identification of customers through “know your customer” (KYC) compliance rises globally.

In 2018, the US Treasury Department’s Office of Foreign Assets Control added two Iranian individuals and their bitcoin addresses to its Specially Designated Nationals List. According to forensic analysis by the Treasury Department, more than 7,000 bitcoin transactions valuing millions of dollars had been processed by these addresses. Apart from other criminal activity and numerous scams, cryptocurrency usage by regimes such as Venezuela and Iran has been one of the driving factors for heavy regulation of the sector.

Apart from country-specific regulations that mandate financial compliance, the Financial Action Task Force’s standards were set in 2019 and are now enforced across 37 member countries. These standards impose full KYC compliance at the level of virtual asset service providers, as well as a “travel rule” that requires both originators and beneficiaries of cryptocurrency transactions to identify and report suspicious information.

These regulations effectively exclude Iran from major cryptocurrency exchanges. This has tilted the Iranian cryptomarket toward local exchanges, where price premiums on the currency are higher. Iran is thus losing out on its competitiveness in mining compared with other jurisdictions. While electricity costs are lower, other costs related to mining, such as hardware and operations, are much higher in Iran. Meanwhile, there is still regulatory uncertainty over the future of cryptocurrency within Iran.

Despite these challenges, there are new developments in the world of cryptocurrency that may open up new possibilities for the Iranian government and people to evade sanctions. One significant development is the rise of central bank digital currencies, which are the governmental take on cryptocurrencies—central banks issuing natively digital money.

China and Russia have notably been working on these projects for some time, and the Chinese sovereign coin, or “digital yuan,” is expected to be launched this year. The implications for international sanctions are vast. First, these projects inevitably run on private blockchains that provide no traceability to outside countries the way a bitcoin network does. The second is that these instruments are completely outside the purview of current US-led global financial architecture. Countries that are still open to cooperating with Iran could easily explore avenues through the use of such sovereign coins.

Foreign Policy



UN: Wars Now Displace Over 122 Million People as Aid Funding Falls

FILE PHOTO: Sudanese women from community kitchens run by local volunteers prepare meals for people who are affected by conflict and extreme hunger and are out of reach of international aid efforts, in Omdurman, Sudan, June 22, 2024. REUTERS/Mazin Alrasheed/File Photo
FILE PHOTO: Sudanese women from community kitchens run by local volunteers prepare meals for people who are affected by conflict and extreme hunger and are out of reach of international aid efforts, in Omdurman, Sudan, June 22, 2024. REUTERS/Mazin Alrasheed/File Photo
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UN: Wars Now Displace Over 122 Million People as Aid Funding Falls

FILE PHOTO: Sudanese women from community kitchens run by local volunteers prepare meals for people who are affected by conflict and extreme hunger and are out of reach of international aid efforts, in Omdurman, Sudan, June 22, 2024. REUTERS/Mazin Alrasheed/File Photo
FILE PHOTO: Sudanese women from community kitchens run by local volunteers prepare meals for people who are affected by conflict and extreme hunger and are out of reach of international aid efforts, in Omdurman, Sudan, June 22, 2024. REUTERS/Mazin Alrasheed/File Photo

The number of people displaced by war and persecution around the world climbed above 122 million this year due to a failure to resolve multi-year conflicts such as those in Sudan and Ukraine, the UN refugee agency said on Thursday, noting that funding to help the refugees has fallen to 2015 levels.

There were over 2 million more people displaced globally by the end of April 2025 than there were the previous year despite the return of nearly the same number of Syrians after the collapse of Bashar al-Assad's rule, according to the report by United Nations High Commissioner for Refugees Filippo Grandi.

The report attributed the rise to major conflicts in Sudan, Myanmar and Ukraine and a "continued failure to stop the fighting".

"We are living in a time of intense volatility in international relations, with modern warfare creating a fragile, harrowing landscape marked by acute human suffering," Grandi said in a statement alongside the report.

The surge in displacement numbers comes as funding to help them has fallen to 2015 levels when the total number of refugees around the world stood at about half current levels, Reuters quoted the UNHCR as saying.

It described the cuts in aid as "brutal and ongoing" and said the situation was untenable, leaving refugees and others vulnerable.

Humanitarians complain that a lack of political leadership in brokering peace deals is prolonging conflicts and stretching aid groups tasked with addressing their impacts.

The agency, whose largest donor has historically been the US, has previously said that the cuts put millions of lives at risk and left women refugees at a greater risk of rape and children at risk of trafficking.

UNHCR has not given details on which donors have reduced their funding. US President Donald Trump has cut most foreign aid while Britain and European neighbors are spending less on aid and more on defense.