A new study has discovered that Iran earns hundreds of millions of dollars in the form of cryptocurrencies via Bitcoin mining, which can be used for purchasing imports and decreasing the impact of US sanctions. As per the figures provided by Elliptic, the blockchain analytics firm, the Bitcoin production in Iran, which is approximately 4.5% of the total world production, would generate revenues of about $1 billion in a year. An almost total economic embargo has been imposed by the United States on Iran, which includes a complete ban on all imports from the shipping, banking, and oil sectors of the country.
Even though exact figures are extremely difficult to determine, the estimates made by Elliptic are based on the data that was collected by Cambridge Center for Alternative Finance on Bitcoin miners up to April 2020. In addition, it also used statements of the power generation company controlled by the state in January, which indicated that miners were consuming up to 600 megawatts of electricity. A process referred to as mining is used for creating Bitcoin and a number of other cryptocurrencies. It involves the use of powerful computers that compete with each other for solving complex mathematical problems.
It is an energy-intensive process and often relies on electricity generated via fossil fuels. Luckily, Iran appears to have a rich supply of these. The trading of Bitcoin and other cryptocurrencies that are mined overseas is prohibited by the central bank in the country. However, local media reports that these currencies are easily available on the black market. In recent years, Iran had officially recognized crypto mining as a separate industry. It had offered cheap power to the miners and required them to sell the mined Bitcoins to the country’s central bank. More miners, especially those hailing from China, were attracted to Iran due to the prospect of accessing cheap power.
It is permitted in Tehran to use cryptocurrencies that are mined in Iran for the payment of imports of authorized goods. According to the study, Iran has recognized that a sanctions-hit economy that has a surplus of natural gas and oil and a shortage of hard cash can benefit from Bitcoin mining. It further disclosed that the electricity that’s being consumed in the country by miners would need an equivalent of about 10 million barrels of crude oil, which would account for almost 4% of the total oil exports of Iran in 2020.
Therefore, the Iranian state is using the bitcoin mining process to effectively sell its energy reserves and bypassing the trade embargoes placed on global markets. Iran-based miners receive their payments directly in the form of Bitcoin, which is then used for payment of imports, allowing them to circumvent sanctions placed on payments made via financial institutions in the country. Elliptic said that financial firms that had just begun to offer their crypto services, especially in the United States, should take into account the potential sanctions they would be exposed to because of Bitcoin mining in Iran.