Iran resorts to extracting cryptocurrencies to reduce the impact of sanctions
A recent study concluded that about 4.5% of all Bitcoin extraction takes place in Iran, generating hundreds of millions of dollars in cryptocurrencies that can be used to finance imports and mitigate the impact of sanctions imposed.
Figures from Eleiptek, a blockchain analyst, show that Iran’s Bitcoin production equals nearly $ 1 billion a year in revenue, at current extraction levels.
The United States is imposing an almost complete economic blockade on Iran, which includes an embargo on the oil, banking and shipping sectors.
While the exact figures are “extremely difficult to pin down,” Elliptek estimates are based on data from Bitcoin extractors compiled by the Cambridge Alternative Financing Center up to April 2020, and data from the Iranian government-controlled power generation company in January that were up to 600 Megawatts of electricity used by cryptocurrency miners.
Bitcoin and other cryptocurrencies are mined through a process called “mining,” in which powerful computers compete to solve complex math problems.
This process is energy-intensive, and usually relies on electricity generated using Iran’s rich fossil fuels.
The Central Bank of Iran prohibits trading in bitcoin and other cryptocurrencies extracted abroad, but the currencies are widely available on the black market, according to local reports.
Iran has officially recognized the extraction of cryptocurrencies as an industry in recent years, to provide it with cheap electricity and obligate its extractors to sell it to the central bank.
Cheap electricity attracted more miners, especially from China, to Iran.
Tehran allows cryptocurrencies mined in Iran to finance authorized imports of goods.
“Iran has realized that extracting Bitcoin presents an attractive opportunity for an economy that is slipping under the yoke of sanctions and suffering from a lack of cash liquidity, with a surplus of oil and natural gas,” the study said.
According to the study, the electricity used by Iran’s cryptocurrency extractors requires the equivalent of about ten million barrels of crude oil annually to generate it, which is about four percent of Iran’s total oil exports in 2020.
“Thus, the Iranian government is practically selling its energy reserves on the world market, using the Bitcoin mining process to circumvent the trade sanctions”.
