Cryptocurrency adoption
The case for Bitcoin in Iran: A way to regain financial sovereignty?
Iran has a very particular relationship with cryptocurrency, and, most importantly, Bitcoin mining. However, after a few back and forths, the country may finally realize the potential benefits crypto could have for its economy.
An overview of Iran’s mining situation
Back in May 2021, Iran’s government imposed a four-month ban on cryptocurrency mining. The prohibition was due to energy shortages happening across the country because of the extreme temperatures during the summer.
Now, winter is over. Since October 1, miners have been free to resume operations. The lift of the ban came as great news since Iran used to host 4.6% of the global hashrate. But it also means that Iran can once again take advantage of the multi-billion dollar industry that is cryptocurrency mining.
Mining legal framework in Iran
There’s a catch, however. Miners in Iran require a license to operate, and the government doesn’t allow “domestic” mining. The use of household electricity to mine cryptocurrency is strictly prohibited.
That said, officials estimate that at least 85% of the crypto miners within Iran are unlicensed and mining illegally.
In fact, as soon as the ban was imposed, the government began cracking down on illegal mining operations. A well-known case was that of Tehran’s Stock Exchange (TSE) director, Ali Sahraee, who announced his resignation after being caught running several ASIC miners in the TSE basement without a license.
Nonetheless, miners remain optimistic as there is speculation about the government introducing a new, friendlier legal framework around cryptocurrency mining. Their expectations are primarily fueled by Iran’s change of government. Ebrahim Raisi took the presidency back in August, and many expect that he will change the country’s stance on cryptocurrency. They hope he will see the economic benefits that it can bring to the country.
Geopolitical issues: Could crypto be the way out?
The oil industry dominates and drives Iran’s economy. The country is home to the fourth-largest oil reserve globally — a precious natural resource they can’t take advantage of due to the economic sanctions imposed by the UN and the US.
In that context, a censorship-resistant monetary network such as Bitcoin or other cryptocurrencies could be the best way to give Iran access to the global market once again.
“Not only do the sanctions limit Iran’s ability to conduct international trade, but they also isolate the country from the global monetary system. Cryptocurrency is a roundabout way of tapping into that market without any help from the US.”
— Prabhjote Gill for Business Insider.
Indeed, the last set of sanctions imposed by the US former president Donald Trump last year were directly targeted at Iran’s financial sector, aiming to further shut Iran out of the global banking system. The United States has the power to freeze any assets deposited in 18 of Iran’s largest banks.
Iranian officials and traders have already been using cryptocurrency to go around these sanctions and avoid the banking systems. Trades happen as covert ‘ship-to-ship’ transfers at sea, and parties agree to pay and charge in crypto assets.
Crypto mining and the energetic crisis
Cryptocurrency mining not only enables Iran to regain access to a global, free market; it also provides the country with the potential to scale its energetic production.
We’ve already seen this happen in Texas’ unregulated energy market. Bitcoin mining creates an increasing need for power, which provides electricity producers with the necessary demand to ramp up and scale their production and operations.
If you want to read more about how Texas is partnering up with Bitcoin miners, check out our article below.
Iranian lawmakers proposed to offer “barter deals” for crypto miners, which would allow miners to pay for energy in the cryptocurrency they mine at a favorable rate set by Iran’s central bank.
“Cryptos are becoming an inseparable part of the global financial industry. Policymakers need to be aware of this technology so that we can benefit from it.”
— Ehsan Arkani, member of the Iranian Parliament (Source)
Closing thoughts
Troubled countries in complicated economic situations like Iran have much to gain from cryptocurrency. Regaining financial sovereignty, solving energetic crises, and boosting industrial development are only a few of the benefits a decentralized, censorship-resistant network can provide to an entire nation.
Iranian legislators are starting to see that the benefits far outweigh the costs. In the long term, cryptocurrency’s electricity consumption is a small price to pay, quickly amortized by the capital provided by mining.
It will be interesting to watch events unfold as more world leaders start embracing crypto. This technology may play a critical role in the geopolitical landscape of the future.
What do you think? Will Iran adopt a friendlier approach to cryptocurrency? How would that affect the country’s economic situation? What role will crypto play in geopolitics a few years from now?
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