The Iranian Presidential Center for Strategic Studies, a thinktank attached to President Rouhani’s office, has published a detailed report stressing the necessity for the regime to use cryptocurrencies to generate extra income.

Extracting cryptocurrencies, the report states, could provide economic benefits to several different sectors of the country's economy. It claims that if the government intervenes seriously it could generate US$2 million a day and $700 million a year in direct revenue from cryptocurrencies. Revenues from receiving transaction fees for the entire bitcoin network would generate $22 million a year for the Iranian government, it says.

The report also states that creating more facilities such as Bitcoin mines in Iran would lead to an increase in employment. Cryptocurrency miners, it says, also have a basic need for electricity, and for every megawatt of electricity consumption about nine people are directly employed.

"If large mining farms are established,” the authors write, “the need to employ manpower for monitoring and repair, security, electrical engineers and technical staff related to hardware and software equipment will increase, which leads to more job opportunities in other sectors."

Meanwhile, the report suggests that regulated cryptocurrency activity in Iran might also help preventing foreign currency from leaving the country by reducing the need for people buy digital currencies. Instead, it says, applicants could purchase cryptocurrency using rials inside the country.

Other strong points of bolstered cryptocurrency extraction, it says, would include "strengthening the export sector of technical and engineering services associated with the production of cryptocurrencies" and "the possibility of attracting foreign investment and reducing the need for foreign currencies”.

Tellingly, the report also notes the capacity of bitcoin in particular to circumvent sanctions on Iran. "As the newly-extracted bitcoins are not easily traceable,” the authors state, “despite the pressure of sanctions on the country, domestic economic actors can use newly-extracted cryptocurrencies, which are preferable to existing bitcoins, on international exchanges."

It is questionable that Iran’s dedicating more electricity to cryptocurrency mining is a good idea when the country’s aging power network is already struggling to provide power to citizens, with multiple cities plagued by outages in January. But on the contrary, the report claims that cryptocurrency mining would improve "efficiency in the electricity industry", "electricity generation capacity" and "balancing electricity consumption and production". It says "Iran's economy is not easily able to sell its oil and gas in the face of sanctions, but by building cryptocurrency mining farms, it reduces electricity losses and converts gas into cryptocurrencies, which generates high income for the economy in a time of sanctions.”

The report finally recommends that the government adopt an approach of “flexibility” in dealing with cryptocurrencies, enabling the "collective mining" of cryptocurrencies in Iran, creating mining pools next to power plants where possible, and adopting a single policy for all cryptocurrency miners. It also stresses the importance of transparency in legislation and ensuring compliance with a uniform set of rules.

A Long Precedent of State-Endorsed Covert Energy Generation

For many years now, the Iranian authorities have used any means they can to circumvent international sanctions to finance the administration of the country, from fuel smuggling to setting up front companies, to forging online identities and using cryptocurrencies. During the presidency of Mahmoud Ahmadinejad some institutions, including the police, took oil from the government and sold it on to provide the funding they needed.

During the recent protests in Sistan and Baluchistan province, Molavi Abdol Hamid, the Sunni Friday Imam of Zahedan, said in response to the killing of fuel smugglers by the Revolutionary Guards: "The officials themselves were happy to export fuel to circumvent sanctions.”

He was correct. Iranian officials constantly decry smuggling in public proclamations, and insist on the need to crack down on it, but simultaneously create the conditions for this covert activity to take place and profit from it. Both behind the scenes and in the Iranian parliament, they have issued extensive licenses to boost the “underground” economy so in order to raise the funds to run the country.

The prohibition of private, unlicensed cryptocurrency mining in Iran is an example of this double standard. Since the start of the year numerous reports have again highlighted widespread activity by foreign investors in cryptocurrency mining in various Iranian cities, including official China-Iran partnerships, in full view of the state.

Disregarding the apparent dual position of the authorities, numerous Iranian thinktanks have recently stressed the need for the government to make extensive use of cryptocurrencies to circumvent sanctions. It seems the office of President Hassan Rouhani agrees with them.

Related coverage:

Khuzestan Cracks Down on Bitcoin Mining

Fact File: Did Bitcoin Mining Lead to Blackouts in Iran?

Iranians Use Bitcoin to Bypass Sanctions and Launder Money

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