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



Russia Warns US, South Korea and Japan against Forming Security Alliance Targeting North Korea

Russia's Foreign Affairs Minister Sergei Lavrov attends the Association of Southeast Asian Nations (ASEAN) Post-Ministerial Conference during the 58th ASEAN Foreign Ministers' meeting and related meetings at the Convention Centre in Kuala Lumpur, Thursday, July 10, 2025. (Mohd Rasfan/Pool Photo via AP)
Russia's Foreign Affairs Minister Sergei Lavrov attends the Association of Southeast Asian Nations (ASEAN) Post-Ministerial Conference during the 58th ASEAN Foreign Ministers' meeting and related meetings at the Convention Centre in Kuala Lumpur, Thursday, July 10, 2025. (Mohd Rasfan/Pool Photo via AP)
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Russia Warns US, South Korea and Japan against Forming Security Alliance Targeting North Korea

Russia's Foreign Affairs Minister Sergei Lavrov attends the Association of Southeast Asian Nations (ASEAN) Post-Ministerial Conference during the 58th ASEAN Foreign Ministers' meeting and related meetings at the Convention Centre in Kuala Lumpur, Thursday, July 10, 2025. (Mohd Rasfan/Pool Photo via AP)
Russia's Foreign Affairs Minister Sergei Lavrov attends the Association of Southeast Asian Nations (ASEAN) Post-Ministerial Conference during the 58th ASEAN Foreign Ministers' meeting and related meetings at the Convention Centre in Kuala Lumpur, Thursday, July 10, 2025. (Mohd Rasfan/Pool Photo via AP)

Russia’s foreign minister on Saturday warned the US, South Korea and Japan against forming a security partnership targeting North Korea as he visited his country's ally for talks on further solidifying their booming military and other cooperation.

Russian Foreign Minister Sergey Lavrov flew to North Korea’s eastern Wonsan city on Friday for a meeting with his North Korean counterpart Choe Son Hui, The Associated Press.

Relations between Russia and North Korea have been flourishing in recent years, with North Korea supplying troops and ammunitions to support Russia’s war against Ukraine in return for military and economic assistance. That has raised concerns among South Korea, the US and others that Russia might also transfer to North Korea sensitive technologies that can increase the danger of its nuclear and missile programs.

After a meeting with Choe on Saturday, Lavrov accused the US, South Korea and Japan of what he called their military buildups around North Korea.

“We warn against exploiting these ties to build alliances directed against anyone, including North Korea and, of course, Russia,” he told reporters, according to Russia’s state Tass news agency.

The US, South Korea and Japan have been expanding or restoring their trilateral military exercises in response to North Korea’s advancing nuclear program. On Friday, the three countries held a joint air drill involving US nuclear-capable bombers near the Korean Peninsula, as their top military officers met in Seoul and urged North Korea to cease all unlawful activities that threaten regional security.

North Korea views major US-led military drills as invasion rehearsals. It has long argued that it’s forced to develop nuclear weapons to defend itself from US military threats.

Lavrov said Russia understands North Korea’s decision to seek nuclear weapons.

“The technologies used by North Korea are the result of the work of its own scientists. We respect North Korea’s aspirations and understand the reasons why it is pursuing a nuclear development,” Lavrov said.

During their meeting, Choe reiterated that North Korea “unconditionally” supports Russia’s fight against Ukraine. She described ties between North Korea and Russia as “the invincible alliance.”

Lavrov said he repeated Russia’s gratitude for the contribution that North Korean troops made in efforts to repel a Ukrainian incursion into Russia’s Kursk border region.

Wonsan city, the meeting venue, is where North Korea recently opened a mammoth beach resort that it says can accommodate nearly 20,000 people.

In his comments at the start of his meeting with Choe, Lavrov said that “I am sure that Russian tourists will be increasingly eager to come here. We will do everything we can to facilitate this, creating conditions for this, including air travel,” according to the Russian Foreign Ministry.

The Wonsan-Kalma tourist zone is at the center of North Korean leader Kim Jong Un’s push to boost tourism as a way to improve his country’s troubled economy. But prospects for the biggest tourist complex in North Korea aren’t clear, as the country appears unlikely to fully reopen its borders and embrace Western tourists anytime soon.