Iran is using Bitcoin mining to evade crippling U.S. sanctions on its economy, according to a new study.
Blockchain analytics firm Elliptic estimates that around 4.5 percent of global Bitcoin mining takes place in Iran, allowing the country to earn hundreds of millions of dollars in cryptocurrencies that can be used to “purchase imports and bypass sanctions.”
U.S. sanctions have severely affected Iran’s banking sector and prevented the country from exporting oil, which accounts for 70 percent of the country's revenues.
Bitcoin and other cryptocurrencies are created through a process known as mining, where powerful computers compete to solve complex mathematical formulas or puzzles. The process requires huge amounts of electricity.
"Iran has recognized that Bitcoin mining represents an attractive opportunity for a sanctions-hit economy suffering from a shortage of hard cash, but with a surplus of oil and natural gas," said Elliptic.
Iran’s crypto mining industry has grown in recent years, with the government providing the industry with cheap electricity and demanding that it sells mined bitcoins to the central bank.
Cheap power has attracted foreign miners, especially from China, to Iran.
Iran uses crypto mining to pay for the import of authorized goods, Elliptic said.
"Iran-based miners are paid directly in bitcoin, which can then be used to pay for imports -- allowing sanctions on payments through Iranian financial institutions to be circumvented," the London-based company said.