In the wake of U.S. “maximum pressure” sanctions reimposed in 2018, the Iranian government turned to cryptocurrency not only as a tool to bypass banking restrictions in international trade, but also as a strategic vehicle to fund proxy groups across the Middle East. But what started as a creative workaround has become a major challenge—fueling capital flight and internal corruption, exacerbating Iran’s energy crisis, and strengthening the hand of the country’s powerful and opaque the Islamic Revolutionary Guard Corps.
In 2022, the Iranian government embraced crypto-mining and issued licenses for more than 10,000 mining facilities and the operation of around ninety crypto exchanges across the country. In 2024, an estimated $4.18 billion worth of cryptocurrency left Iran, according to blockchain analytics firm Chainalysis.
[Iran’s] state-backed crypto push came with unintended consequences—chief among them, a deepening electricity crisis.
This state-backed crypto push came with unintended consequences—chief among them, a deepening electricity crisis. While Iran’s power grid began experiencing seasonal shortages in 2018, the problem intensified dramatically with the introduction of crypto mining. Today, the country faces power deficits of up to 15,000 megawatts in cold seasons and 25,000 megawatts in hot seasons, crippling both industry and everyday life.
Despite government orders to halt crypto mining during peak demand periods, these operations still consume as much as 2,000 megawatts, according to Iran’s Ministry of Energy. Though the figure may be inflated, there’s little doubt that Iran remains one of the world’s top crypto-mining hubs.
Back in 2021, analytics firm Elliptic estimated that 4.5 percent of all Bitcoin mining occurred in Iran. At the time, it took roughly 600 megawatts of electricity to generate $1 billion in annual crypto revenue. State subsidized electricity worsens the problem. The cost of mining one Bitcoin—currently worth around $104,000—can be as low as $1,300. That economic incentive makes enforcement of mining restrictions almost impossible.
Nor is the impact of unrestrained crypto mining limited to Iran: A recent police crackdown on illegal cryptocurrency mining in Kuwait’s southern Wafrah town led to a significant drop in its electricity consumption, underscoring the substantial impact of mining on power usage.
Chainalysis identified Iranian government cryptocurrency use as pumping billions of dollars into sanctions authorities.
The Islamic Revolutionary Guard Corps has become addicted to crypto mining and prioritizes its operations above the national good. In 2021, Iran’s Ministry of Energy attempted to shut down an illegal mining operation, only to have the Islamic Revolutionary Guard Corps resist with forces of arms. The Energy Ministry appealed to the Ministry of Intelligence for assistance, but received no answer, highlighting the impunity with which the Revolutionary Guards operate. Meanwhile, Chainalysis identified Iranian government cryptocurrency use as pumping billions of dollars into sanctions authorities.
Instead of cracking down, Iran’s parliament passed legislation in 2022 granting military institutions the right to establish their own private electricity connections. This move effectively gave the Islamic Revolutionary Guard Corps access to both subsidized electricity and portions of free electricity reserved for public-sector use—resources it could redirect to crypto mining with little or no government oversight.
The government recently requested cryptocurrency mining centers to install solar panels, a demand with costs amounting to hundreds of millions of dollars. Following this announcement, Revolutionary Guards-affiliated media published reports about crackdowns by the Revolutionary Guards on unauthorized miners, an action that appears to be an attempt to divert public attention from the culpability of the Revolutionary Guards, as combating illegal mining is not within its jurisdiction.
According to the latest report of the Central Bank of Iran, $14 billion exited the country in the first nine months of the 2024 fiscal year.
Contrary to the initial hopes of the government, meanwhile, cryptocurrency use for foreign trade has not been successful. For example, Mostafa Salehi-Nejad, secretary-general of the Iran-Qatar Joint Chamber of Commerce, stated that Iranian merchants would need to transfer the money first to the United Arab Emirates to convert it into cryptocurrency, a process that would result in 20 percent losses and commissions. Cryptocurrency, however, does contribute to capital flight. According to the latest report of the Central Bank of Iran, $14 billion exited the country in the first nine months of the 2024 fiscal year. Since 2018, capital flight increased by 450 percent. This appears to be directly tied to cryptocurrency. Chainalysis reported a 70 percent rise in crypto outflows from Iran in 2024, reaching $4.18 billion. The surge coincided with periods of military tension between Iran and Israel, pointing to both ordinary citizens and regime insiders using crypto to safeguard assets abroad.
What began as a state-sanctioned workaround for sanctions has mutated into a security vulnerability. The Islamic Revolutionary Guard Corps’ relationship with the Iranian government is increasingly parasitic, rather than symbiotic, as the Islamic Revolutionary Guard Corps enriches itself while its actions cause capital flight, blackouts, and unravel government control over the economy.
