The planets revolve around the Ayatollah’s head. Or so. Square in Tehran, image by roadconnoisseur via License: Creative Commons

Once again, Bitcoin is becoming a topic of geopolitics: Two senators in the USA are demanding information from the Biden administration about the extent to which Iran is using cryptocurrency to circumvent sanctions – and what the government wants to do about it.

US Senators Elizabeth Warren and Angus King have written a letter to the US Defense Department and Treasury Department warning that Bitcoin mining allows Iran to evade financial sanctions.

Since Iran legalized mining in 2019, it has earned millions of dollars from it. Bitcoin mining is a reliable source of income that allows the militant Islamist state to pay for imports and finance Hamas and other terrorist organizations.

Iran, the two senators explain, is one of the world’s largest producers of Bitcoins. In 2021, around seven percent of global mining took place there, so much that data centers overloaded the country’s power grid. According to a calculation by analyst Elliptic, the energy used for mining was equivalent to 10 million barrels of crude oil, which accounted for about 4 percent of Iran’s total oil exports in 2020.

Between 2015 and 2021, Bitcoin mining brought in more than $186 million to Iranian crypto platforms, the letter continues, most of it in 2021. It is estimated that Iranian Bitcoin miners brought in as much as $1 billion in 2021 .

The regime in Tehran knows how to use crypto mining for its own purposes. It requires miners to sell cryptocurrencies to the central bank so that it can use it to pay for imports. The country also uses cryptocurrencies to circumvent sanctions, both private and government. Major exchange Binance is estimated to have processed $8 billion in Iranian transactions over the past four years.

Iran’s use of cryptocurrencies is a “direct threat to our national security.” Iran uses it to finance terrorist groups such as the Palestinian Hamas, which promotes the genocide of Jews, as well as groups such as Hezbollah, which murdered three US soldiers in Jordan in a drone attack in January. “Unless we intervene, Iran will continue to use crypto to finance attacks against Israel.”

To better assess how this situation will evolve, Senators Warren and King ask the administration a few questions:

  • How much has Iran earned from cryptocurrencies since 2021 and how much of that goes to the government or government-affiliated actors?
  • How much money does the government of Iran launder using cryptocurrencies per year?
  • To what extent does Iran finance terrorist organizations, military operations and defense developments through cryptocurrencies?
  • What steps does the government plan to take to counter this danger?

Senator Warren is, it should be noted, anything but unbiased. She is considered the harshest critic of crypto in the USA. For years it has repeatedly called for stricter laws, stricter requirements and tougher action against crypto companies, up to and including a quasi-ban. According to the industry magazine Coindesk, which is not prone to radicalism, it has “declared war on crypto”.

In this matter, however, Senator Warren is often the one who puts her finger in the wound that the crypto industry likes to ignore. If she thinks that crypto companies should be subject to the same rules as banking, or that Bitcoin-based darknet markets have a part in the fentanyl crisis in the US, that’s not entirely far-fetched.

The allegations against Iran do not come out of the blue either. They can be confirmed both by articles in the Iranian magazine “Iran International” and by numerous reports in recent years, even if the opaque information policy of the theocratic regime makes it difficult to assess their reliability.

However, it is undisputed that Iran was a mining hotspot in 2021 and that the government was willing to use Bitcoin and other cryptocurrencies as a substitute for the rare foreign currencies. However, it is unclear what has happened since then. Both the weak power grid and the strict central planning policies make Iran a less fertile ground for strong, organic growth.

But perhaps we will find out more soon. Senators Warren and King are demanding a response from the Biden administration to their questions by May 16. This may shed light on the crypto industry in Iran.


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