In this report, I explore the increasing use of Bitcoin by Iranians, a population facing economic challenges as well as censorship from their government and foreign powers. My goal is to depict how Bitcoin serves as a tool for protecting freedoms and preserving value in a complex economic and political context.
Foreword
For many people unfamiliar with decentralized financial infrastructures, commonly known as "blockchains" or "cryptocurrencies", it can be difficult to grasp the importance of Bitcoin for certain communities.
From a Western perspective, it is common to categorize, perhaps unconsciously, the world's population into 2 broad groups. The first, to which Westerners belong, benefits from access to electricity, drinking water, the Internet, and the banking system. The second, living on the fringes of society in extreme poverty.
But the reality is more complex and nuanced. In various places around the globe, some populations have relatively easy access to the Internet but neither the means nor the need to open a bank account.
Another part of the world, to which the Iranian population belongs, has access to the Internet and the banking system. However, the use of these services is strictly controlled, monitored, and censored by the government.
By forgetting the Western point of view, we realize that Bitcoin goes beyond its role as a mere speculative asset.
Indeed, Bitcoin is a censorship-resistant and pseudonymous value exchange network. These characteristics give it a social utility often overlooked by its detractors.
...
In my document
Orange is the new Green, I highlighted the role of Bitcoin as a catalyst for ecological transition, refuting the arguments considering it as an excessively polluting asset. A point frequently raised by individuals who, ironically, are at the forefront of policies and investments generating millions of cubic meters of CO
2 each year.
With this text, I continue the reflection by seeking to demonstrate that Bitcoin is also an effective tool against government censorship.
...
Being French and Iranian, questioning established authority is a quality deeply rooted in my identity. Therefore, it is with a desire for revolution and change that I began my research.
I quickly understood how difficult it was to talk about tools, such as Bitcoin, used to circumvent the censorship of the Islamic Republic of Iran.
In trying to collect testimonies on several social networks, I was excluded from certain groups, my messages were deleted, and
I was even accused of being a government agent.
Among the people contacted, the majority did not respond or explicitly refused to testify.
One of them voluntarily proposed to translate my questions into Farsi, then to share them with other members of the Iranian Bitcoin/crypto community.
Unfortunately, this person faced numerous criticisms for undertaking to obtain information from people who circumvent the laws. After several days of hesitation, he finally shared the questions, specifying that answering was not mandatory. Eventually, 7 people responded to the translated questionnaire.
In total, I collected 13 testimonies. Although some participants agreed to reveal their identity,
I decided not to disclose any names or pseudonyms. The statements and actions mentioned in these testimonies could expose them to government reprisals, including a risk of imprisonment.
Thus, in the accounts reported in this document, I will use fictional profiles bearing the most popular names in the country: Ali, Mohammad, Fatemeh, Reza, Zahra, Maryam, Hossein, Nima, and Leila.
To uncover the behind-the-scenes of creating this report, I encourage you
to listen to the BitGuide podcast, where I answered many of their questions.
Historical context
In January 1979, Mohammad Reza Pahlavi, the last Shah of Iran, was forced to leave Iran following numerous protests. His departure paved the way for Ruhollah Khomeini, who, after 15 years in exile, united communists, mujahideen, liberals, and democrats.
Upon his return to Iran, Khomeini declared the end of the monarchy on February 11th, 1979, first establishing a provisional government, then instituting the Islamic Republic of Iran on April 1st of the same year.
In November 1979, Iranian students stormed the U.S. Embassy in Tehran, taking its staff hostage and accusing them of spying. This hostage crisis significantly deteriorated the relations between the United States and Iran, leading to the imposition of economic sanctions.
In 1980, Iraq invaded Iran, hoping to take advantage of the country's instability. The war, which lasted 8 years and resulted in between 600,000 to 1.2 million deaths, ultimately strengthened the Iranian regime and promoted the cult of martyrdom in the country.
The sanctions imposed on Iran have severely affected its international relations and economic development. They have led to high unemployment rates, particularly among the youth, and significant inflation of the Iranian rial.
Freezing of $12 billion in financial assets by the United States
During the Iran-Iraq war, the United States imposes an arms embargo and bans financial credits to Iran, due to alleged ties with Hezbollah.
This measure limits Iran's access to modern military technology and equipment, potentially affecting its national security and, indirectly, its internal stability.
The United States imposes an embargo on Iranian oil, reducing Iran's oil revenues, directly impacting its national economy, public services, and the standard of living of its citizens.
The Amato-Kennedy Act prevents any foreign company from investing more than 20 million dollars in Iran, particularly in the hydrocarbon sector, affecting employment and the country's economy.
The United Nations and the European Union impose an arms embargo on Iran, including telecommunication surveillance equipment and military-use nuclear material. This embargo weakens Iran's defense and attack capabilities, influencing security and stability in the region.
The Comprehensive Iran Sanctions, Accountability, and Divestment Act (CISADA) by the United States imposes a new embargo on Iranian oil and sanctions foreign financial services operating with Iran. This results in a shortage of essential products and services, affecting the daily lives of Iranians.
The European Union sanctions on the Iranian energy sector prohibit the import of Iranian hydrocarbons and freeze the financial assets of the Islamic Republic of Iran. They also impose additional restrictions on the export of Iranian hydrocarbons and disconnect Iranian banks from the SWIFT network.
The United States withdraws from the Joint Comprehensive Plan of Action, leading to the reinstatement of U.S. economic sanctions, increasing the cost of living, inflation, and exacerbating daily difficulties for Iranians.
Due to Iran's non-compliance with terrorism financing standards, the Financial Action Task Force (FATF) measures make commercial exchanges with Iran more difficult. They reinforce financial restrictions, hindering international commercial transactions and access to financial markets, which may affect the import of essential goods.
Sanctions in response to protests in Iran are imposed by Canada, the United Kingdom, and the EU mainly against Iranian structures and leaders, notably for supplying military equipment to Russia. These sanctions exacerbate internal tensions and repression, negatively influencing civil liberties and the quality of life.
The daily life of Iranians
My goal is not to assess the justifications for international sanctions, but to provide you with a more precise insight into the daily life of Iranians in an economic context under embargo and geopolitical influences.
Inflation
Inflation is a direct consequence of years of economic instability in Iran. The Iranian Rial (IRR) has suffered from high inflation for at least half a century, with a peak of 49.7% in 1995, and an average of around 40% per year since 2019. In 10 years, the Iranian Rial has lost more than 95% of its value.
Inflation rate in Iran between 1960 and 2023 –
The World BankUnemployment
Official statistics indicate an unemployment rate
of 7,5% in 2023,
reaching 20,5% among those under 24 years old. However, these figures are controversial, accused of being minimized by the government.
Many Iranians work informally or receive a part of their salary unofficially to reduce tax burdens and mitigate the impact of inflation.
Regarding this, Mohammad explained to me:
"Suppose my salary is $500. On the first day of the month, the employer officially pays $150 of my salary to reduce charges. Then, he pays the rest, $350, informally."
The banking system
The sanctions imposed by the United States and the European Union against Iran severely limit the financial transactions of Iranians. They are unable to send or receive money from abroad, and are also limited in purchasing international products or services.
To circumvent these restrictions, Iranian companies often open subsidiaries and bank accounts abroad, notably in Dubai and South Korea.
Government censorship
In addition to international sanctions, the Iranian government imposes strict censorship, which materializes in different ways.
Despite the general invitation to vote, electoral results are always manipulated in favor of the Supreme Leader, leaving Iranian citizens devoid of any influence over the elites who run the country.
This censorship also extends to the Internet, which is heavily restricted in Iran. Iranians are deprived of access to many websites and social networks commonly used in the West. The only way for them to circumvent these restrictions is the use of VPNs. Encrypted messaging applications, such as Telegram, are among the few means of free communication.
Speaking of this, Ali told me:
"We don't even have access to the global financial system, and many everyday routines that young people in wealthy countries take for granted are inaccessible to us. For instance, our access to Spotify is limited. Many might find this amusing, but we are fighting two enemies: the internal enemy, which has imposed numerous restrictions on us and deprived us of our freedom, and the foreign enemy, whose sanctions have directly affected the lives of ordinary people.
[...]
It may be hard to believe, but having access to free internet has become a major goal for us."
Protests
Since 1979, more than 4,000 Iranian citizens have been killed and at least 36,000 imprisoned during various protests.
During protests against Shah Mohammad Reza Pahlavi, violence spread to almost all major cities, gathering millions of participants. Between 2,000 and 3,000 people were killed, and several thousand were imprisoned.
During the 1999 student protests, triggered by the closure of a reformist newspaper, unrest spread to several cities, mobilizing about 10,000 people. At least 4 people were killed, and estimates of the number of detainees vary between 1,200 and 1,400.
Following accusations of electoral fraud, significant protests broke out in at least 10 major cities, involving millions of participants. Government repression killed at least 100 protesters and arrested at least 4,000 people.
The 2017-2018 economic protests, starting in Mashhad and spreading to over 140 cities, resulted in at least 22 deaths and 3,700 arrests.
During the 2019 protests, triggered by a sudden increase in fuel prices and affecting 100 cities in the country, at least 304 people were killed, and more than 7,000 were arrested.
The 2022 protests following the murder of Mahsa Amini spread across all 31 provinces, resulting in the death of over 500 people, the execution of 7 individuals, and the detention of nearly 20,000 people.
To better understand the extent of these protests, let's take the example of the murder of
Mahsa Amini.
This 22-year-old woman, arrested for inappropriate wearing of the hijab, died on September 16, 2022, from injuries inflicted by the police.
While authorities cite a cardiac arrest, her family accuses the police of beating her.
In response, protests broke out, initially local, they quickly spread across the country.
In protest, many women burned their hijabs and cut their hair.
Faced with these movements, the police and army responded with brutality,
causing the death of over 500 protesters, the arrest of about 20,000 people, and the execution of 7 of them.
Although centered on women's rights, these protests reflect broader frustration with the regime in place.
How do Iranians use Bitcoin? And why?
Bitcoin is a decentralized digital currency that is resistant to censorship. Unlike traditional monetary systems, Bitcoin operates without a central authority, thanks to a network of independent nodes that validate transactions. This structure makes it extremely difficult for a single entity to block or restrict transactions, thus ensuring greater financial freedom for its users.
Other blockchain infrastructures, such as Ethereum, benefit more or less from the same qualities of resistance to censorship and allow the exchange of tokens backed by another asset, like Tether’s USDT. USDT is a stablecoin designed to maintain its value equal to the US dollar.
Unlike the dollar and fiat currencies, Bitcoin is scarce, which translates into a long-term upward trend in its value.
Protection against inflation
One of the main reasons why Iranians use Bitcoin and cryptocurrencies is to fight inflation.
With inflation reaching nearly 40% in 2023 and 95% over the past 10 years, the Iranian Rial is not a currency made to be kept over time.
Among the options available to Iranians, there is the conversion of their rials into dollars. While possible, it is a complex and expensive operation, mainly due to international restrictions.
USDT, therefore, allows Iranians to hold and exchange one of the world's most stable currencies.
However, the use of USDT is not without risk. Managed by the company Tether, it has several times depeged from the real value of the dollar it is supposed to follow. Other stablecoins, similar to USDT, have lost their parity with the dollar and never recovered, a phenomenon that could also happen to it.
Moreover, if the use of USDT by Iranians were to raise concerns in the United States, it could be possible that Tether would be requested to freeze all tokens associated with Iran, which would prevent its users from continuing to use it and result in the loss of their funds.
It is also important to note that the dollar is also subject to inflation, although it is less pronounced than that of the Iranian Rial. The US dollar has lost about 25% of its value over the last 10 years.
As for Bitcoin, although it is volatile in the short term, it has proven to be the asset that has best preserved its value in the long term, going from about $3,000 in 2018 to nearly $50,000 in January 2024.
Compared to the Iranian Rial, it offers even stronger protection, its current value exceeding 22 billion Rials, a record never reached before.
The price of Bitcoin against the dollar (orange) and against the Iranian rial (blue) –
NobitexHere are some testimonials about inflation:
"I invest in Bitcoin to preserve the value of the money I have and to avoid losing my capital."
- Fatemeh
"The key issue here is that cryptocurrencies in Iran are mainly used to preserve value. People in Iran often queue up to buy dollars in cash, which are now in shortage. People's interest in Tether increased once they became acquainted with it. Currently, there are few people who are not familiar with cryptocurrencies."
- Ali
Circumventing sanctions and prohibitions
Thanks to the decentralization of the Bitcoin network and other blockchains, BTC and USDT become means to circumvent censorship.
On one hand, these assets escape government bans, while on the other, users can easily circumvent international restrictions and make transfers and payments abroad.
Thus, many online services and products are purchased undeclared with Bitcoin and USDT.
Why not declare it? Most of the time, it’s because the desired products are forbidden to purchase by the government.
Here are some excerpts from testimonials describing the different ways they spend their bitcoins:
"Yes, [Bitcoin] has also impacted the lives of my close family and friends. Government censorship has reduced the quality of our lives."
- Fatemeh
"The main reason I use the Bitcoin is due to the sanctions and restrictions imposed on certain products in Iran. This has forced me to make payments using cryptocurrencies. These constraints also apply to other people, and in my opinion, they should also adopt Bitcoin. The bans significantly impact our ability to lead a normal life.
Primarily, I use it to buy software and to transfer money to desired destinations. There are already some stores that accept Bitcoin payments."
- Reza
"As you may know, Iranians are heavily involved in Bitcoin because we have the weakest economy in history. People live with Bitcoin, but no one talks about it openly. If you want to include this information in your research or article, you can mention that even the rent payments of some apartments in the expensive northern areas of Tehran are made in USDT. In Iran, everyone knows they should not disclose their possession of Bitcoin. But almost everyone owns some. Bitcoin has a much more political dimension than economic, social, or cultural in Iran. People mainly use it to oppose the government."
- Muhammad
"International transfers and purchases with Visa and Mastercard are very complicated and incur many additional costs, and they are also subject to sanctions, so Bitcoin solves all these problems."
- Zahra
"I used Bitcoin to transfer funds on a friend's recommendation. Although converting Bitcoin to fiat currency was not as simple at the time, this tool was a godsend for an Iranian. Subsequently, I deepened my knowledge of the technology and started exploring the blockchain. It was a captivating universe, especially since I could buy certain subscriptions using Bitcoin or other cryptocurrencies."
- Ali
"I first heard about Bitcoin from my friends in 1396 (corresponds to 2017), but it was only in 1401 (2022) that I used it to buy a VPN during the protests for Mahsa Amini."
- Maryam
"I have used Bitcoin in a fast-food restaurant and at the dentist's office, and it also serves me as a store of value."
- Hossein
"With the development of the Lightning Network, there are many stores that accept Bitcoin."
- Nima
Receiving their salaries
Several interviewees testified that they, as well as some of their acquaintances, ask to be paid all or part of their salary in USDT or Bitcoin.
According to them, Iranians are adopting this method to minimize their tax burden, which could have serious consequences for their savings.
"On the other hand, inside the country, we are faced with censorship and government restrictions, which is why we use Bitcoin and Tether to get paid our income as freelancers."
- Maryam
What are the barriers to Bitcoin adoption in Iran?
One of the interviewees, responding under the pseudonym
Stupid Risks, conducted a months-long experiment to identify obstacles and assess the ease of introducing new people to Bitcoin.
Firstly, Stupid Risks believes that access to relevant information for understanding the technical, economical, and social aspects of Bitcoin is not particularly difficult for Iranians.
According to him, although speeking in English is an advantage, there is enough content on social media (mainly YouTube and Telegram) that simplifies Bitcoin and explains how to create and secure a Bitcoin/Lightning wallet, as well as how to use it.
However, Stupid Risks identifies several gaps that could be filled. He thinks that creating a growing and benevolent community, ideally led by celebrities or influential people, would be a big help.
He explains why this will be difficult to achieve:
"A part of this problem comes from the ignorance of celebrities and so-called benevolent media about the importance and power of Bitcoin. Another part is due to the restrictions and dangers that the government can impose on Bitcoin users in the country. Solution: it is essential that some of us negotiate and even organize meetups."
Stupid Risks does not think a prolonged electricity or internet outage is likely, even under a regime like Iran's, but he still considers it a possibility.
In my opinion, the risk of an internet outage is often overestimated, especially with the emergence of solutions allowing Bitcoin to be sent via SMS, such as Machankura 8333.
The main issue raised by Stupid Risks concerns misconceptions about currencies. Many believe that holding physical money is safer than in digital form, and that currencies other than the rial are still backed by real assets.
In reality, since the 70s, no national currency is backed by anything. They all depend on a government's monetary policy and its central bank.
Stupid Risks rightly emphasizes that for broader adoption of Bitcoin in Iran, Iranians must understand that, even though it is digital, Bitcoin is inherently scarce and more reliable than fiat currencies.
He says:
"The first mental obstacle is the popular belief in the false dichotomy of 'physical money versus virtual money' instead of 'fiat money versus hard money.'"
The last issues mentioned by Stupid Risks are also common in the West:
- the majority of investors are attracted by the prospect of profit and move towards cryptocurrencies that are riskier and less effective against censorship and inflation;
- Iranians remain attached to third-party custody of their assets, even being aware of banking corruption and the risk of seizure in the country;
- Bitcoin, being a new currency and technology, suffers from the indifference and lack of curiosity of the population to inform themselves and learn in order to use it effectively.
Bitcoin adoption in statistics
While testimonials are important, they are often biased and influenced by the opinions and positions of the people expressing them.
Therefore, I will now refer to a report published by ArzDigital media, titled
"The Cryptocurrency Space in Iran - 1402". This report constitutes a statistical study on the use of cryptocurrencies by Iranian citizens and businesses.
The Iranian adoption of Bitcoin and cryptocurrencies in numbers
Here is a non-exhaustive list of the most interesting statistics:
- 25% of Iranians own cryptocurrencies ;
- 32.2% have shown interest, and 29% have previously owned them;
- 48.9% of those who do not own them state they lack sufficient information on the subject to take the plunge.
Among Iranians who own cryptocurrencies:
- 38.10% have not invested in any other market;
- As of November 2023, 53% were at a loss (Bitcoin was below $35,000)
- 61% invested before 2021;
- 82.10% invest to combat inflation;
- 21.90% use decentralized finance (DeFi);
- 9.60% use cryptocurrencies to transfer or receive money from abroad;
- 7.70% use cryptocurrencies for purchasing goods or services;
- 76.6% believe that international sanctions are a barrier to accessing cryptocurrencies;
- 57.20% believe that restrictions related to internet access (such as the requirement to use IP-changing tools) are a barrier;
- 68.10% invest long-term (several months or years, "Hodl").
The most common cryptocurrency is Bitcoin, followed by Dogecoin and Shiba Inu in second and third place. Ethereum ranks only fifth, behind Cardano.
Local exchange platforms have been created, offering various advantages:
- 84.10% use them rather than foreign platforms because they can pay directly in Rial;
- 45.5% because it is more likely to receive legal follow-up in case of bankruptcy;
- 34.70% because the applications are in Farsi, thus highlighting the importance of documentation in the local language.
However, these platforms face several obstacles, notably high fees. Indeed, 52.70% of users believe that withdrawal fees are excessive, equivalent to the fees charged by Binance in Europe, about $20 for BTC withdrawals.
Regarding fees, one of the interviewees informed me of a technique to circumvent these fees by performing an "atomic swap" via Boltz by withdrawing BTC on Lightning to receive it on-chain. This would save about 90% of the fees normally paid to the platforms.
According to the ArzDigital report, if one were to represent the average profile of Iranian cryptocurrency investors by a single person, it would be a 38-year-old man residing in Tehran, with a portfolio distributed as follows: 22% in BTC, 18% in DOGE, 17% in SHIBA, 15% in ADA, 12% in ETH, 10% in TRON, and 6% in USDT.
Crypto laws in Iran
Regarding the regulation of cryptocurrencies in Iran, several important measures have been implemented by the government to frame the industry. Here is an overview of the main regulations in force:
- Regulation of Bitcoin mining: The Iranian government now requires licenses for Bitcoin mining, with the aim of regulating this activity, particularly in terms of energy consumption and compliance with established standards. Specific guidelines have been issued regarding electricity supply for Bitcoin miners.
- Limits on exchange transactions: The Central Bank of Iran imposes restrictions on the amounts of deposits and withdrawals made on cryptocurrency exchange platforms. A license is required to formalize the operation of these platforms and ensure their compliance with regulatory standards.
- Cryptocurrency taxation: Currently, buying and selling cryptocurrencies are not subject to taxes in Iran. Although Parliament has proposed imposing taxes on cryptocurrency transactions, this measure has been rejected, mainly due to the lack of a clear legal definition of cryptocurrencies.
Public opinion on the approach of governmental institutions towards cryptocurrencies varies: 11.9% of those surveyed wish for maximum liberalization of cryptocurrency use, while 65.0% prefer moderate legislation and control of this space. Finally, 23.1% are in favor of limiting the cryptocurrency space as much as possible.
Future outlook
Bitcoin, along with other cryptocurrencies to a lesser extent, proves to be a tool that allows Iranians to circumvent government censorship, international sanctions, and the severe inflation that has affected Iran for several decades.
For Iranians, Bitcoin is not just a speculative asset but also a means of liberating themselves from government control. The increase in its adoption in Iran is a promising sign for the country's future. Not just because I think it will gain in value and enrich its users, but mainly because it represents a form of currency necessary for the life of a democracy.
However, the use of Bitcoin has several drawbacks:
- Its volatility: although often cited as a deterrent, BTC's volatility will decrease with its adoption. Furthermore, in the context of a long-term investment strategy, its impact becomes less significant;
- Its novelty: it is essential to educate users on secure and prudent use of Bitcoin;
- Transaction fees: when high, they push users towards more centralized wallets (exchange platforms or custodial wallets), a limitation that is being resolved with solutions like Phoenix Wallet, Fedimint, and others.
Moreover, Iran's economic situation is undergoing significant changes. The country's integration into the BRICS and its economic alliance with Russia could open Iran further to the outside world, thus freeing it from Western restrictions.
By integrating Bitcoin, or simply by tolerating its use, Iran could foster the emergence of a parallel economy. This would represent an opportunity for the country to benefit from this new economic dynamic while allowing its population to free itself from the international constraints imposed on it.
Fiat currencies are designed by the elites and for the elites. The very concept of money printing excludes the population, even though it is the population that gives value to this means of exchange. Whereas Bitcoin, being a scarce, easily transportable, transferable, and divisible asset, is the ideal candidate to become the perfect money. Moreover, its resistance to censorship allows populations who were not fortunate enough to be born in the right place to emancipate themselves.
Beyond showcasing the use of Bitcoin in Iran, the goal of this writing is to highlight the deeply rooted injustices in our economic and political system. This system leaves a part of the population on the margins of society while favoring another that is considered more "deserving."
To add a touch of poetry, I will make a literary reference, and quote the monologue of Figaro, who pointed out to Count Almaviva that he had only the luck and merit of being born into the right family, in the right place, at the right time:
"What have you done to deserve such advantages? Put yourself to the trouble of being born — nothing more! For the rest — a very ordinary man! Whereas I, lost among the obscure crowd, have had to deploy more knowledge, more calculation and skill merely to survive than has sufficed to rule all the provinces of Spain for a century Yet you would measure yourself against me."
- Beaumarchais's "The Marriage of Figaro" (Act V, Scene 3)
Bitcoin is a peer-to-peer payment network. By definition, or by code, it does not distinguish between its users. Humans would be incapable of providing such a service, as they are often driven by the quest for wealth, while Bitcoin is designed to be impartial.
Even if it may seem complex at first glance, I think it is essential to make the effort to devote time to it, to take an interest in it, to adopt it, and to discuss it, because Bitcoin could allow our neighbours to at least "subsist."
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How are Iranians positioning themselves?
The allure of the forbidden has always been a fundamental aspect of human nature, and Iranians are no exception. The government bans alcohol consumption? Yet, it's easy to obtain. Certain types of music are prohibited? There are tons of nightclubs, rap/rock/metal bands, etc. Social networks are under bans? Yet, almost everyone has an Instagram account.
Until recently, it was nearly impossible for Iranians to circumvent banking sanctions or access a store of value; Bitcoin is changing the game.
Although the word "Republic" appears in Iran's official name, the government is far from a democracy.
Regarding this subject, Ali told me: