The USA is one of these countries that use sanctions to dog their political opponents’ economies. An embargo is the bloodless means of punishment for misbehavior. There are some circumstances when such actions are needed, but mostly, they are driven only by cold calculations.
In this article, I won’t comment whether sanctions issued on Iran are right or wrong. What I would like to do is to show the Iranian government’s perspective on mining and cryptocurrencies. The approach to these proceedings may be changed in the light of the current situation in the country concerned, as you can read in one of my last articles. Blockchain technology is able to help avoid significant loss of goods in a given country when the embargo is severe.
Iran has been struggling with prohibitions since the hostage crisis of 1979. The event followed the Iranian Revolution, which took place almost a year earlier. Iran once was a progressive country where the Islamic religion didn’t regulate the law until the Revolution came in. It was raised mostly by the poorer part of the citizens who tended to be more religious. These people wanted to live under Shiite legislation and perceived the western way of governing as faulty. After many protests, which were becoming more and more violent, even some soldiers began to engage in the opposition.
Eventually, Iran evolved into Islamic republic. The hostage crisis took place while some fractions of the opponents were fighting for power. The group of Iranian students forced their way into the American Embassy in October 1979. They took all the workers and people who were there hostage. Nine months later, negotiations solved the crisis, and hostages were released.
A year after obtaining his presidency, Donald Trump imposed sanctions towards Iran for the first time in November 2018. They were strengthened over time as some events came on the way. That’s the opposite of actions taken by Obama, who revoked a 20-year system of sanctions against Iran for pursuing a nuclear weapons program.
The current president has clearly pointed out what he thinks about Obama’s decision:
“Sanctions come off Iran, and they become a productive and prosperous nation again – The sooner, the better!”
Current situation in Iran
Over a week ago, Trump tightened up the embargo – it is also directed against the Central Bank of the Islamic Republic of Iran. It followed attacks on oil facilities in Saudi Arabia for which US officials blamed Iran. Foreign Minister Mohammad Javad Zarif emphasized his opinion on these actions in an interview with Reuters’ reporters:
“This is a sign of US desperation… When they repeatedly sanction the same institution, this means their attempt at bringing the Iranian nation to its knees under ‘maximum pressure’ has failed”
“But this is dangerous and unacceptable as an attempt at blocking … the Iranian people’s access to food and medicine.”
As we can read in the Business Insider article, the sanctions aren’t only aiming at the Iranian government. They are mainly affecting citizens who are literally losing their lives’ savings. The inflation is so high, they can’t even afford to go to the cinema. In Iran there are no pubs or clubs, so watching a movie is one of the few ways to spend their spare time. Once crowded bazaars are empty now or crowded by tourists who find the new prices extremely cheap. $1 equals to 115 000 rials, by comparison: two years ago $1 was worth 30 000 rials.
Iranian citizens fighting for their savings
Iranians needed to face the problem and found a way to cope with it. Some of them started to mine cryptocurrencies, using the super low energy prices (1kWh = 0,006$). It is also known that they were installing their mines in mosques and schools, which are, as public institutions, exempt from paying for the energy, etc. The power used to mine 1BTC is similar to the consumption made by 24 households in a year. Mining led to increase the national energy consumption by 7% and now costs Iran about $1 billion yearly. It also affects access to energy for regular people.
The government decided to cut off the electricity for illegal mines. It also confiscated 1,000 computers from two such places. Abdul Nasser Hemmati, the president of the Central Bank of Iran, said that the extraction of international digital currencies should be based on the price of electricity intended for export. He also added that mined cryptocurrencies should be directed on the home market. Eventually, Iran banned trading in cryptos in 2018.
LocalBitcoins, a cryptocurrency exchange platform, made another strike. It has closed the access for the Iranian users. The majority of Iranian crypto-holders used it because it doesn’t require international credit card information, which Iranians cannot hold for decades. The exchange allows users to pay using their local bank accounts, and that’s why it was so popular. LocalBitcoins restrained from commenting on their decision. We can only suspect that it is connected with US sanctions.
Iran planning to legalize mining
After hectic months, Iran decided to recognize cryptocurrency mining as an industry within its borders officially. It is possible that it was encouraged to do so by Venezuela, which issued its cryptocurrency to fight hyperinflation.
The matter is discussed even by ayatollahs (experts in Islamic studies such as jurisprudence). Some of them perceive Bitcoin as problematic but still worth considering.
The Central Bank of Iran governor Abdolnaser Hemmati said in a statement:
“A mechanism to mine digital coins were approved by the government’s economic commission and will later be put to discussion at a cabinet meeting.”
Iran is also developing its National Blockchain Platform (Borna), which aims to replace the outdated banking system, but it can be a way to protect its financial interests from the sanctions. The developers want Borna to function as a central digital platform for banking and economic sectors.
It seems that the government is very close to finalising the regulation on cryptocurrency legislation. It would remove the illegal status of cryptocurrencies, although trading in cryptocurrencies reminds prohibited.
Does blockchain have future in Iran?
As you may see, Iran’s perception of cryptocurrencies is constantly changing. The government is oppressed by the USA and at the same time, not entirely convinced whether to trust cryptocurrencies or not. Creating its blockchain platform is a huge step to find a way to escape from the sanctions and also can change the authorities’ minds on this matter.