Disguised as a national mine, Iran may use cryptocurrency to break through US economic sanctions

According to a report by Iranian media Financial Tribune, the Central Bank of Iran (CBI) is authorizing banks and licensed foreign exchange stores to use cryptocurrencies as a payment method for import fees.

According to its regulatory framework, cryptocurrencies must only come from licensed cryptocurrency mines. These mining operations are officially permitted industrial activities in Iran and require operators to obtain a license from the Ministry of Industry, Mines and Trade. Financial Tribune also wrote that the Iranian government previously approved regulations that would allow cryptocurrencies to be legally used for import in October 2020, provided that miners sell their cryptocurrencies directly to the Central Bank of Iran.

As early as early January this year, the Iranian government's official media "Iran Daily" reported that due to the increasing pressure on Iran to use hard currency normally in the face of international economic sanctions from the United States, the government has amended its cryptocurrency regulations to make digital assets exclusively for imported goods. In practice, this means that Bitcoin and other cryptocurrencies officially mined under government supervision will have to be supplied directly to the Central Bank of Iran (CBI) within authorized limits, which are partly determined by the amount of subsidized energy used by miners. The report did not specify how the CBI will purchase cryptocurrencies or at what exchange rate, but the government is likely to purchase Bitcoin at a price below the market.

According to the Financial Tribune, Iranian authorities have closed a total of 1,620 illegal mining farms since Iran legalized cryptocurrency mining in July 2019. Bitpush previously reported that in July 2019, Iranian cabinet ministers legalized cryptocurrency mining, but entities engaged in mining activities need to hold a license from the Iranian Ministry of Industry, Mining and Trade.

Also in late January this year, according to local Iranian media reports, Iranian police confiscated about 45,000 Bitcoin mining machines that illegally used subsidized electricity. Mohammad Hassan Motavalizadeh, head of Iran's state-owned power company Tavanir, said that these miners consumed 95 megawatts of electricity per hour at super cheap prices, and the total consumption was equivalent to the electricity expenses of a city with a population of more than 500,000.

Iran has successfully transformed itself into a Bitcoin mine disguised as a country by taking full control of the domestic crypto mining industry and using regulations. The current move to authorize banks and licensed foreign exchange stores to use cryptocurrencies as a payment method for import expenses is another step towards the larger-scale use of cryptocurrencies. Iran is likely to take more actions in the future to cash in cryptocurrencies to change the country's current predicament.