The country uses the digital currency to pay for imports and circumvent oil sanctions.
While Iran’s regulatory relationship with Bitcoin runs hot and cold, a new report from blockchain analytics firm Elliptic indicates that regulated mining activities may be driving upwards of $1 billion in revenues and helping the country evade economic sanctions imposed by the United States.
An excerpt of the report published today points to research indicating that Iran currently accounts for 4.5% of total global Bitcoin mining operations, earning the state hundreds of billions which have been used to circumvent the oil embargo in particular.
“The US imposes an almost total economic embargo on Iran, including a ban on all Iranian imports and sanctions on Iranian financial institutions,” reads the report. “Oil exports have plummeted 70% over the past decade, leaving the country in a deep recession with soaring unemployment and periods of civil unrest.”
“In the face of these sanctions, Iran has turned to an unlikely solution – Bitcoin mining.”
The report notes that cheap, abundant oil means that energy-intensive mining operations are comparatively inexpensive for Iran. As such, foreign investors, especially from China, are playing a key role in the country’s expanding crypto economy — sometimes with the assistance of the Iranian military.
“Several Chinese businesses have been granted mining licenses and have established operations in the country. These companies have described establishing good relationships with ‘the army in Iran’, and one particularly large facility in the Rafsanjan Special Economic Zone was reportedly built in collaboration with a ‘military organization’,” the report says.
Ultimately, these state-sanctioned mines produce Bitcoin which can then be used to help the country sell its oil by proxy: excess energy and oil is used to produce Bitcoin, which can then be sold on global markets.
The report also notes that this dynamic “has become all but an official policy.” In late April Iran passed laws that will enable banking entities to purchase imports with cryptocurrencies, and then in May the government appeared to try and strengthen its grip on crypto with a law banning the use of foreign-mined BTC for imports.
Despite now appearing to function as a key part of Iran’s global trade strategy, the official relationship with Bitcoin hasn’t always been so rosy. In January officials tried to place the blame for endemic power outages on illegal mining operations (though experts said that a decrepit power grid was the more likely culprit), and earlier this morning reports emerged that the country is using its intelligence agency to hunt down illegal farms.