At its core, the proliferation of crypto currencies in Iran presents a complex challenge for the Islamic Republic of Iran (IRI). On the one hand It is a potentially effective sanctions evasion method adopted by civilians. It is especially important to consider here that sanctions explicitly seek to reduce living standards of civilians in hope of an uprising against regime. Any technology that improves the lives of vast numbers of civilians is beneficial to the regime, as it reduces the chance of such a challenge it’s power and authority. Furthermore, the presence of a large bitcoin mining industry within Iran, as well as the holding of large amounts of bitcoin by Iranians could also be beneficial to the regime, which could use such capital to bypass international sanctions itself. It seems the Iranian government has already taken steps to adopt crypto currency sanctions evasions methods, in August 2022 a USD 10 million import order was placed by the Iranian government.
Alternatively, that a potentially sizeable portion of Iranians are using a decentralised currency which implies a decentralisation of finance and the separation of Iranian civilians from traditional financial services. Indeed, this decentralisation of finance has an inherently libertarian veneer which contradicts with the authoritarian underpinnings of the IRI, which seeks maximum control over its economy.
The reaction of the Iranian state to the proliferation of crypto currencies reflects its view of this dilemma. The question that arises here is whether the state has endeavoured to cooperate with civilians in developing this potentially effective financial tool and sanctions evasion method; or does state legislation, action or inaction reveal an effort to appropriate cryptocurrency from the hands of civilians and exclusively into the hands of the state?
Whilst legislation in Iran concerning crypto currency trading and mining is often murky and contradictory, it nonetheless suggests that a process of state co-optation, rather than cooperation, is playing out. Law makers and officials have been stringent and restrictive with regards to non-mining activities, such as investing and trading cryptocurrencies. In August 2022, for instance, the governor of the Central Bank of Iran (CBI) said that the sale and purchasing of cryptocurrencies or their use for investment in Iran is forbidden. The government has also cracked down on the civilian mining industry and has sought to reduce its independence from the state by making it a legal requirement to sell mined bitcoin to the CBI. Furthermore, this year around 9,000 mining devices have reportedly been confiscated by Iranian police. There have been reports of similar raids on small and medium scale civilian mines in previous years.
This is despite 2019 legislation, in which Iranian lawmakers made Bitcoin mining an official industry, in an effort to promote licenced and authorized mining. However, a 2021 CoinDesk report claimed that only 30 licenses had been issued to crypto mining farms across the country. Government officials often cite concerns for Iran’s energy infrastructure when seeking to explain this contradictory government action on cryptocurrencies. However, the presence and growing dominance of large-scale mines in Iran suggests otherwise. Reports in Iranian media indicate that influential and well-connected networks often control these large-scale mines. Many of these are also owned by Chinese companies, which reportedly maintain strong relationships with the ministries of energy, foreign affairs and the army in Iran; one of the largest Chinese facilities in Iran was reportedly built in collaboration with a ‘military organisation’.
It thus seems that the Iranian state is keen to bring about a shift in the Iranian cryptocurrency industry, away from the hands of small-scale miners and traders seeking to use the technology to provide a degree of emancipation from the harshest effects of sanctions, and into the hands of large-scale entities and prominent individuals with stronger ties to the state apparatus. This process of forceful state co-option makes it clear that the Iranian state intends to utilize the benefits of the Iranian crypto currency industry but does not feel like it has to give up any control of its economy in order to do so. Once again, crypto currencies are ultimately subject to power.
By Joshua Honey - MENA Analyst