A recent study concluded that approximately 4.5% of total Bitcoin mining occurs in Iran, generating hundreds of millions of dollars in cryptocurrency that can be used to fund imports and alleviate the impact of imposed sanctions. Data from the blockchain analytics company Elliptic indicates that Iran's cryptocurrency production equates to revenues of about one billion dollars annually, at current extraction levels. The United States imposes almost total economic sanctions on Iran, including a ban on the oil, banking, and shipping sectors.
While precise figures are "extremely difficult to determine," Elliptic estimates that up to 600 megawatts of electricity is used by cryptocurrency miners in the country, based on data from Bitcoin miners collected by the Cambridge Centre for Alternative Finance until April 2020 and data from the government-controlled electricity generation company in January. Bitcoin and other cryptocurrencies are mined through a process called mining, where powerful computers compete to solve complex mathematical problems. This process is energy-intensive and typically relies on electricity generated from the fossil fuels that are abundant in Iran.
The Iranian economy, which is struggling under the burden of sanctions and cash flow shortages, views Bitcoin mining as an attractive opportunity. The Central Bank of Iran prohibits the trading of Bitcoin and other cryptocurrencies mined abroad, but these currencies are widely available on the black market, according to local reports. Iran has officially recognized cryptocurrency mining as an industry in recent years, allowing access to cheap electricity while requiring miners to sell their output to the central bank. The low electricity costs have attracted more miners, especially from China.
Tehran permits locally mined cryptocurrencies to finance imports of licensed goods. The study stated that "Iran has realized that mining Bitcoin presents an attractive opportunity for an economy burdened by sanctions and suffering from liquidity shortages, with a surplus of oil and natural gas." According to the study, the electricity used by cryptocurrency miners in Iran requires the equivalent of about ten million barrels of crude oil annually to generate, which is roughly 4% of Iran's total oil exports in 2020. Therefore, "the Iranian government essentially sells its energy reserves in global markets, utilizing Bitcoin mining to circumvent trade sanctions."
