Is Iran Pushing a Bitcoin Revolution?

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  • In two years Iran has gone from a Bitcoin-banner to a Bitcoin adopter
  • US sanctions pushing acceptance and Bitcoin development
  • Bitcoin Mining licenses earning money for the state

Iran hasn’t always been a Bitcoin fan, but with the population and the government both pushing the adoption of Bitcoin in different ways and for different reasons, Iran may now be the country pushing the envelope as far as national adoption of the cryptocurrency goes.

Increased Bitcoin Use

Having banned access to cryptocurrency exchanges in May 2018, the squeezing of the Iranian economy thanks to US sanctions has caused the Iranian government to rethink its approach to the new paradigm. Iran banned banks from dealing with cryptocurrency exchanges in May 2018, and with Visa and Mastercard forced to follow US sanctions and ban transactions in the country and the rial undergoing hyperinflation, merchants were forced to turn to other means of accepting payment.

Many turned to installing Bitcoin terminals and accepting the cryptocurrency for goods and services, which led to a massive spike in use of sites like LocalBitcoins through which users procured Bitcoin in record numbers. LocalBitcoins cut access for Iranians in 2019 at the same time as it was seeing record demand, but this has just forced people to go elsewhere, resulting in massive premiums for the cryptocurrency.

Iran recently rebranded and redenominated the rial to the toman and chopped off some zeros in an attempt to curb hyperinflation, but the move will not change the habits of those already using alternative methods like Bitcoin.

Bitcoin Mining – From Threats to Tax Breaks

Crypto mining in Iran has come a long way in a short space of time. Less than a year ago, people using subsidized electricity for mining crypto were threatened with having their power cut off, while stories of mining rigs being seized abounded.

However, in September last year the Iranian National Tax Administration (INTA) changed the narrative and issued an edict which said that Bitcoin miners who brought their foreign income, in other words their profits from selling mined Bitcoins, back into the country then they would receive a tax break.

At the same time the government went from hunting down Bitcoin miners and confiscating their equipment to issuing Bitcoin mining licenses and taking a cut of the profits, with 1,000 licenses already issued by January this year. This U-turn on Bitcoin mining philosophy is squarely rooted in the government’s desire to offset US sanctions through the government-agnostic currency and could provide a lucrative side hustle.

Iranian Stablecoin

Talk of an Iranian state cryptocurrency first emerged last year as the authorities discussed the opportunity of further evading sanctions by replacing the rial with a state-backed stablecoin. This stablecoin was said to be “imminent” last year according to an official from the Iran Chamber of Commerce, although there have been no further announcements on this subject since. With the recent changes to the rial, it may be that the government has temporarily shelved the idea, although it could return to it as a nuclear option if the existing plans don’t work out.

Necessity is the Mother of Invention

Iran’s use of cryptocurrency has been largely driven by two factors – citizens trying to find an alternative to the crumbling fiat currency and the government looking to bypass American sanctions. These twin drivers have led to Iran being an unlikely adopter of Bitcoin, and we may yet see their methods adopted around the world by countries in similar straits.