Iran has become the only country in the world where you can legally mine Bitcoin but cannot legally spend it.
August 2019. Iran's Cabinet of Ministers approves a directive that legalizes cryptocurrency mining as an industrial activity. The Ministry of Industry, Mine and Trade begins issuing 12-month licenses — but only for installations consuming 30 kW or more. These are not home computers in bedrooms. These are industrial farms the size of factory floors, where hundreds of ASIC miners hum around the clock, converting electricity into hashes.
Simultaneously, the Central Bank of Iran categorically bans any cryptocurrency transactions inside the country. Bitcoin is classified as a "sanctions evasion tool" and a threat to financial stability. You cannot open an exchange. You cannot accept BTC as payment. You cannot legally sell mined coins to citizens. The legal construction looks like an engine where the piston simultaneously moves up and down: the state permits creating digital assets industrially but criminalizes their circulation within the economy.
Technically, it works like this. A miner registers a company, submits documents to the Ministry of Industry, receives a license, rents or builds a facility (often in industrial zones with electricity surpluses — for example, near oil fields or gas power plants), imports equipment (usually Chinese: Bitmain Antminer, MicroBT WhatsMiner), connects to the Iranian Grid Management Company network, pays an industrial tariff of 5-5.7 cents per kWh (pegged to export prices for gas and electricity, but during hot summer months it can spike to 17 cents). The farm starts operating. Miners solve cryptographic problems, receive Bitcoin rewards, record transactions in the blockchain — all legal from an industrial legislation standpoint.
Then the gray zone begins. By law, licensed miners must sell all mined cryptocurrency either to the Central Bank or through the NIMA system (Integrated Foreign Exchange Market) — a mechanism created to bypass sanctions and finance imports without access to SWIFT. In practice, this means: you mine Bitcoin legally, but don't control where it goes. The state takes the coins at a fixed rate (often unfavorable to the miner), uses them for international settlements through shell companies and OTC deals, finances purchases of medicine, equipment, food — everything Western banks refuse to process because of the embargo.
The result is a construction where cryptocurrency exists as a semi-finished product: it can be produced but cannot be consumed inside the country. As if a factory stamped out cars but forbade citizens to drive them — export only.
Parallel to licensed farms, Iran has a thriving shadow industry of illegal mining, consuming, according to Iranian Grid Management Company estimates, up to 1.4-2 GW of electricity. This is almost double the legal sector (which eats up about 600 MW, equivalent to burning roughly 10 million barrels of oil per year).
Illegal farms hide in unexpected places. The most famous example — facilities in mosques, where electricity is subsidized by the state or completely free as part of religious infrastructure. Imagine: under the prayer hall vaults, in the basement or a utility room, stand racks of ASIC miners running around the clock. Heat output is enormous (one Antminer S19 Pro produces 3.25 kW of heat — like three powerful space heaters), ventilation roars, the meter spins, but there's no payment. The power system loses money, the grid overloads, but farm owners are invulnerable: a mosque is protected territory, difficult to raid without political consequences.
Other illegals embed themselves in residential neighborhoods, industrial zones, abandoned buildings. Some connect directly to lines, bypassing meters (essentially stealing electricity). Some use household tariffs, which in Iran are heavily subsidized for the population (about 0.7-2 cents per kWh versus industrial 5-17 cents). The economics are simple: if you pay 2 cents instead of 17, your profit from one ASIC miner multiplies. Risks exist (fines, equipment confiscation, criminal liability), but potential profit is enormous — especially when Bitcoin's price rises.
In 2021, Iran's power system started cracking at the seams. Summer brought rolling blackouts — cities plunged into darkness for several hours a day. Officially, authorities blamed "drought" (hydroelectric plants produced less power) and "extreme heat" (air conditioners devoured peak capacity). But in parallel, a hunt for illegal farms began: police and power workers conducted raids, seized thousands of ASIC miners, published photos of confiscated equipment (racks of GPUs and ASICs, resembling Google server rooms, only without air conditioning).
The government imposed temporary mining bans — even for licensed farms. The logic is absurd: we legalized your activity, issued licenses, collected industrial tariffs, but now we're stopping operations because the grid can't handle it. As if a factory received a production permit, built a line, then was told: "Sorry, not enough electricity, shut down for a month." Miners lost millions (equipment sits idle, but loans and rent don't go anywhere), but there was no choice.
Large licensed farms in Iran are not garage startups. These are partnerships with foreign companies (predominantly Chinese) and structures connected to the military. Example: a facility in the Rafsanjan zone (Kerman province) — an industrial farm built with Chinese investor participation, who brought equipment, set up infrastructure, trained personnel. In return, they received a share of profits and access to cheap electricity.
Why China? Two reasons. First: until 2021, China controlled about 65% of Bitcoin's global hashrate, and Chinese manufacturers (Bitmain, MicroBT) dominated the ASIC miner market. When Beijing tightened regulation and started closing farms inside the country, part of the capacity relocated to neighboring regions — Kazakhstan, Russia, Iran. Second: Iran and China are linked by strategic partnership (oil contracts, infrastructure projects under Belt and Road Initiative), and cryptocurrency became another tool for bypassing Western sanctions in bilateral trade.
Military structures (including the Islamic Revolutionary Guard Corps) are also involved in the industry. There are no public documents confirming direct farm ownership, but indirect signs exist: facilities on closed territories, control over equipment imports, participation in cryptocurrency export mechanisms. The logic is clear: Bitcoin is a way to convert oil and gas (which Iran cannot freely sell due to sanctions) into a liquid digital asset, which can then be exchanged for currency, goods, or services on the international market, bypassing the banking system.
The scheme works like this. Iran sells electricity (or provides it at low tariffs) to licensed farms. Farms mine Bitcoin. Mined coins go to the Central Bank or through NIMA. The bank uses them to pay for imports (for example, medical equipment from Turkey or electronics from China) through OTC deals with intermediaries who cash out cryptocurrency into fiat. The seller receives dollars or euros, Iran receives goods, Western sanctions are circumvented.
According to Elliptic (a company tracking crypto transactions), Iran controlled about 4.5% of Bitcoin's global hashrate by 2021, generating up to $1 billion in annual revenue. This is not a giant share (China before the ban controlled 65%, the US currently about 35-40%), but for a country under the harshest sanctions — it's a significant source of currency.
Mining is a physical process of converting electricity into computational work. One ASIC miner consumes 3-3.5 kW (like a powerful electric kettle running continuously). A farm with 1000 miners eats 3-3.5 MW — the same as a small factory. Legal Iranian farms consume 600 MW, illegal ones — up to 2 GW. Combined, this is 2.6 GW, comparable to a large city's energy consumption or several metallurgical plants.
The problem is that Iran's power system is not designed for this load. The country depends on gas and oil power plants (80% of generation), plus hydroelectricity (about 15%, but heavily dependent on precipitation). In summer, when temperatures exceed 40-45°C, electricity consumption spikes due to air conditioners. Peak load reaches 60-65 GW, the power system operates at capacity. And then add 2.6 GW of round-the-clock consumption from mining — that's roughly 4% of peak load, but operating 24/7, without weekends or seasonal drops.
In summer 2021, the grid couldn't take it. Rolling blackouts hit Tehran, Isfahan, Shiraz, other cities. Traffic lights stopped working, metro halted, hospitals switched to backup generators. Authorities declared a hunt for illegal farms: raids, confiscations, arrests. But in parallel, they shut down legal farms too — the very ones they'd issued licenses to and collected industrial tariffs from. The logic is simple: better to lose mining taxes than plunge the capital into darkness.
This created an absurd situation for licensed operators. They invested millions in equipment, rent, infrastructure, paid for licenses, agreed to give all cryptocurrency to the state — and got a forced shutdown for several months. ASIC miners are not machines you can pause without consequences. They lose efficiency (Bitcoin network difficulty grows, old models quickly become obsolete), require constant maintenance (dust, overheating, fan wear), and most importantly — don't pay for themselves while idle. If a farm sits idle for a month, the owner loses potential income but continues paying for rent, security, maintenance.
Illegal farms proved more flexible in this situation. Some closed temporarily, some relocated to regions with electricity surpluses (for example, to oil provinces where gas power plants run idle), some simply continued stealing electricity, risking confiscation.
In 2022, Iran's government officially introduced a requirement: all licensed miners must sell mined cryptocurrency to the Central Bank to finance imports bypassing sanctions. This transformed Bitcoin from a speculative asset into a state foreign trade instrument — a digital equivalent of oil contracts.
The scheme operates through the NIMA system, created after Iranian banks were disconnected from SWIFT in 2018 (as part of Trump administration sanctions). NIMA is a closed exchange for currency operations, where exporters (for example, oil companies) sell earned currency, and importers (for example, pharmaceutical firms) buy it to pay foreign suppliers. Cryptocurrency embedded itself in this system as another asset: miners surrender Bitcoin, receive rials at a fixed rate, and the Central Bank uses the coins for settlements with foreign counterparties willing to accept cryptocurrency.
Why does this work? Because Bitcoin is a bearer asset: whoever controls the private key controls the coins. No banks needed, no international transfers needed, no need to disclose the sender's identity. An Iranian counterparty sends BTC to a Turkish or Chinese intermediary's wallet, who cashes out the coins on a local exchange, transfers fiat to the seller, the seller ships goods to Iran. Western sanctions are powerless because the transaction happens in the blockchain, which obeys no state.
Essentially, Iran turned mining into a digital oil refinery. Instead of selling oil and gas directly (difficult due to embargo), the country burns hydrocarbons in power plants, feeds electricity to ASIC miners, receives Bitcoin, sells it for dollars or goods. Hydrocarbon energy converts into cryptocurrency — which, in turn, converts into liquidity.
Iranian citizens also use cryptocurrency, but illegally. Rial inflation reached 40-50% annually during peak sanctions periods, the dollar is unavailable to ordinary people (official exchange is limited, the black market is expensive), so Bitcoin and Tether (a stablecoin pegged to the dollar) became a way to preserve savings. People buy cryptocurrency on P2P platforms (for example, LocalBitcoins, Binance P2P), transfer through Telegram bots, use VPNs to access blocked exchanges. Formally, it's illegal, but authorities turn a blind eye — as long as volumes don't threaten control over the currency market.
The result is a double standard: the state exploits Bitcoin as a regime survival tool while simultaneously forbidding citizens to use it legally. A decentralized technology created as a counterweight to state control became a weapon in the hands of an authoritarian government against the Western financial system.