Iran: will the Islamic republic soon circumvent sanctions with Bitcoin?

Iran is cut off from the international financial market. Will Bitcoin, of all things, bring salvation to the sanctions-battered Regmie?

Iran could soon make use of Bitcoin and other cryptocurrencies to circumvent existing economic sanctions. At least, that’s what a think tank close to incumbent President Rohani is calling for.

The opposition-affiliated news portal IranWire reported on 2 March about the report of the Iranian Presidential Center for Strategic Studies. The think tank identifies several areas where Bitcoin Profit crypto-related investments could benefit the sanctions-hit economy. According to the report, the Islamic Republic would be able to generate two million US dollars in daily and up to 700 million US dollars in annual additional revenues. The mining of Bitcoin in particular is at the centre of these considerations.

The international community originally imposed the economic sanctions as a protest against Iran’s nuclear programme. After the nuclear agreement was concluded in 2015, they were suspended. In 2018, the US reimposed the sanctions after then US President Donald Trump opted for a unilateral termination of the agreement. Since then, Iran has been largely cut off from international payments.

BTC mining for foreign exchange and jobs

The think tank advocates the targeted promotion of Bitcoin mining facilities. Transaction fees alone could bring 22 million US dollars into the state coffers every year. The authors of the strategy paper also hope that this step will lead to an increase in jobs across sectors. These would not only be created in the mining centres themselves, but also in areas such as energy supply and technical services.

In view of repeated power outages in the country, at least IranWire expressed reservations about this proposal. Meanwhile, the Iranian think tank assesses the situation differently. Bitcoin mining could even help increase the efficiency of the energy grid:

The Iranian economy is not easily able to sell its oil and gas in the face of sanctions, but by setting up cryptocurrency mining farms, it reduces electricity losses and converts gas into cryptocurrencies, bringing high revenues to the economy at a time of sanctions.

In fact, Iran has been pursuing a dual strategy in terms of BTC mining for some time. While private mining is prohibited, state-licensed facilities are being created.

Entering the foreign exchange market with Bitcoin

The think tank’s strategy paper explicitly talks about exchanging Bitcoin for urgently needed foreign currencies on international trading exchanges. Mining also plays a key role, because freshly mined BTC is more difficult to track.

But domestic crypto regulations are also recommended. These would prevent an outflow of foreign currency abroad by giving Iranian citizens the opportunity to acquire BTC and co. in exchange for the national currency.

As early as last October, the mullahs allowed domestic traders to use Bitcoin to finance imported goods. The country’s central bank acts as an intermediary.