Iran is preparing bitcoin to reduce the impact of sanctions

A new study claims that about 4.5 percent of all bitcoin mining operations are done in Iran, allowing the country to earn millions of dollars in cryptocurrencies that can be used to buy imports and mitigate the effects of sanctions .

According to data released by analytics firm Blockchain Elliptic, at its current level of mining, bitcoin mining in Iran will generate revenue of nearly a billion dollars annually.

The numbers that Iranian officials cited in January are not far from that estimate, with the government saying the annual mining of cryptocurrency is worth $ 660 million annually.

The United States imposes almost complete economic sanctions on Iran, including a ban on all imports, including the country’s oil, banking and shipping sectors.

While the exact number is “very difficult to determine”, Elliptic’s estimate is based on data collected from the Bitcoin miners by the Cambridge Alternative Finance Center as of April 2020, and data from a state-controlled Iranian power generation company in December. 600 megawatts of electricity was consumed by bitcoin miners.

Bitcoin and other cryptocurrencies are created through a process called mining, in which powerful computers compete with each other for complex computational equations. The process is energy-intensive, and often relies on fossil fuel-generated electricity in which Iran is rich.

Iran provides cheap and subsidized electricity, and is also cheaper in special economic zones where many Chinese entities involved in cryptocurrency mining have set up shop.

The country’s central bank restricts the circulation of bitcoin and other cryptocurrencies withdrawn abroad.

The study concluded that “Iran has felt that bitcoin represents an attractive opportunity for an economy hit by mining restrictions and is suffering from a lack of cash liquidity, but with an excess of oil and natural gas.”

According to the study, the electricity used by miners in Iran would require about 10 million barrels of crude oil every year to generate it, which is about 4% of Iran’s total oil exports.

The study noted, “The Iranian state sells its energy reserves effectively to global markets, bypassing the trade embargo using the bitcoin mining process.”

Similarly, “miners living in Iran are paid directly into bitcoin, which can be used to pay for imports – allowing for the prevention of restrictions imposed on payments through Iranian financial institutions . “