Iran has made its first official import order using cryptocurrency this week, a step that could allow the country to bypass U.S. sanctions.
The order, worth $10 million, could enable the nation to trade using digital assets and avoid the U.S. dollar’s dominance in the international financial system and circumvent deals with other sanctioned countries like Russia, reported Reuters.
Iran relying on crypto for foreign trade
“By the end of Sept, the use of cryptocurrencies and smart contracts will be widely used in foreign trade with target countries,” an official from the Ministry of Industry, Mine, and Trade said on social media.
Iran is subject to an almost complete economic embargo by the United States, with the Department of State’s Office of Economic Sanctions Policy and Implementation responsible for enforcing and implementing these sanctions.
Yesterday, the U.S. Treasury Department’s Office of Foreign Assets Control also sanctioned the token mixing platform Tornado Cash for money laundering violations.
While it appears agencies have tightened their grip in the digital space, as seen with increasing sanctions against Russia, traders are finding ways to flout the rules.
Anand Sithian, counsel at Crowell & Moring, and a former trial attorney in the criminal division of the Department of Justice’s asset forfeiture and money-laundering section, told CNBC: “Crypto mining, while nowhere near a replacement for the assets frozen by Russian sanctions, avoids the fiat-to-crypto on-ramps and crypto-to-fiat off-ramps at centralized virtual currency exchanges, thereby bypassing sanctions screening.”
Crypto mining used to bypass sanctions
Dubai-based exchange Coinsfera is also attracting traders from countries under sanctions, including Russia and Iran. Meanwhile, Binance, the largest crypto exchange by volume, has been accused of allowing users in Iran to trade in contravention of U.S. sanctions.
Meanwhile, Kraken is the latest exchange under investigation by the United States Treasury’s Office of Foreign Assets Control for violating sanctions.
And the International Monetary Fund (IMF) had issued a warning earlier this year that nations like Iran and Russia may utilize cryptocurrencies to circumvent sanctions by using their excess energy resources –– which they are unable to export – to fuel mining, a more energy-intensive method of verifying cryptocurrency transactions.
Elliptic estimated last year that 4.5% of all Bitcoin mining occurs in Iran, allowing the nation to evade trade sanctions and earn hundreds of millions of dollars in crypto-assets that may be used to buy imports and get over the country’s economic restrictions.