A recent report compare the adopt of cryptocurrency around the globe rank Iran capital Tehran 17 ahead city that are more common associate with crypto assets, such as Australia and Japan.
The government and consumer in Iran are involve in a wide range of crypto relate activity, from the development of center bank digital currencies (CBDCs) and payments for foreign trade to mining, trading and new token developments.
The country is rife with crypto scams, and other criminal activities because it lacks an appropriate regulatory environment for Virtual Asset Service Providers (VASPs).
Is cryptocurrency illegal in Iran
Although the use of crypto currencies as a replacement for Iranian Rials/Romans is not allowed in Iran, they are still legal.
This has little practical meaning, as we have found that businesses in Tehran and many other cities accept cryptocurrencies as payment. Iranians use crypto assets to make cross-border payments, and for remittances. This is because international payment systems in Iran are severely restricted.
In 2018, the Iranian regime prohibited
cryptocurrency trading and possession, citing their potential to be used for money laundering. Under pressure from US sanctions it revisited the ban within one year.
Iran is a booming crypto hub
By the end of 2021, daily transfers were estimated to be around USD 180,000,000.
Comparatively, the crypto-ownership rate in the United Arab Emirates (a major regional centre) is around one third of people.
Iran crypto regulations
The country is home to many VASPs including sophisticated exchanges. We found that many of the providers were either extensions of existing money transfer companies or “over-the counter” services nestled on offshore exchanges.
The absence of central supervision and regulation is also a common feature in other jurisdictions. In January 2023, the Iranian cyber police (FATA), which is responsible for VASPs, published rules that they must follow. There is still no licensing provision in the absence of legislation. This raises questions about effectiveness and compliance.
Crypto mining in Iran
Mining is a booming industry in Iran, thanks to its abundant natural resources and cheap electricity. Iran is home to 4.5% of the global Bitcoin mining, which earns it hundreds of millions of US dollars. In 2019, the country declared mining legal and mandated that mining licenses be required in 2022.
The government makes money by providing electricity at higher rates, giving tax exemptions to miners and obtaining their mined assets as payment for imports.
However, the relationship between miners’ unions and government has always been tense.
During high demand periods, the government stopped providing power for mining. The government also cracks down on illegal miners who exploit free or subsidised electricity.
Iran’s mining is unstable due to these factors. Its monthly mining share may drop from 4,5% to 0,12% in just a few short months.
Virtual Asset Service Providers In Iran
It is relatively simple to launch a new exchange without a license due to the lack of licensing and regulations for cryptocurrencies.
As the exchange gains users and trade volume increases, the FATA Police and the government may be interested in the exchange and require it to comply with official demands.
Nobitex Wallex Aban Tether Ramzinex Arzpaya are some of the major domestic exchanges that have offices in Tehran, and which FATA has approved.
Exchange of virtual assets in Iran
According to an ArzDigital study, many Iranians use virtual private networks (VPN) to hide their location. CoinEx (16%), KuCoin (16%), and Binance (9%) are popular choices.
It is not a surprise that Iranians use foreign exchanges despite US sanctions.
Reuters reported that Binance had processed Iranian transactions worth USD 8 billion between 2018 and 22. However, social media analysis shows a mixed picture.
Some Iranian users claim that they can access Binance and other foreign exchanges from Iranian IP addresses without VPN.
Paying for verification services in Iran
In addition, the country hosts several agencies and paid verification services that help Iranians obtain identification documents from foreign countries in order to open a foreign exchange account. These services offer advice about how to circumvent IP-related exchange restrictions, taking into account not only exchanges but VPN providers as well.
Iran is also prone to crypto fraud due to a lack of regulation. Social media scams also abound in Iran.
Scammers target Iranians via Telegram, Instagram and Twitter. They often pose as investors or someone from “capital-management” (common in Iran) and promise huge returns on cryptocurrency investment.
Some are more direct and hold face-to-face discussions, claiming to offer investment advice or “guaranteed profit” in
crypto. Cyber police usually only intervenes after receiving several complaints about a scam.
The scam is more organized when it involves directing victims to fake websites. These websites are designed with the appearance of an authentic exchange and, in some cases, they accept fiat deposits.
Belem exchange
Belem Exchange (Belem.cc, along with Belem.im or Belem.blue) is a platform that targets Iranians.
Belem Exchange supports IRR deposit and operates in 13 different languages, including Persian. Belem is a great place to start if you want to learn about the different languages available.
MoonXBT.com is another similar website that appears to target Iranians, though there haven’t yet been any complaints.
Local news reports in Shiraz at the time this article was written indicated that local promoters from Belem were arrested and accused of fraud amounting to IRR 80 billion (USD 1.9m).
There is a greater risk of fraud in places with ambiguous or light regulation of crypto assets. Residents are less prepared to seek recourse and resolution if they fall victim.
Although some states have banned certain activities or all of them, fraudsters are still able to exploit the poor economic conditions by promising ‘get-rich-quick’ schemes with little investment.
This trend is expected to continue as states struggle with effective legislation and investigative capability. Iran, which is a pariah at best, will remain a prime fraud target due to its dire economic situation and ambiguous crypto assets regulations.
The fall of Sina Estavi & Cryptoland
Sina Estavi (also known as ‘the Crypto-Sultan’) was arrested in May 2021 by the Islamic Revolutionary Guard Corps for creating and selling a cryptocurrency token (which is illegal) in Iran. All assets of his Cryptoland exchange were seized.
Estavi reported that the users of the exchange had been robbed of IRR 270 Billion (USD 6.5 Million) in digital assets and 195 Billion Toman (10 rial = 1 Toman) of real estate collateral. They also claimed to have stolen USD 30 Million.
A voice message purportedly recorded by an employee of Cryptoland at the time of the arrested captured a Cyber Crime Intelligence officer saying that during the raid of their premises, Estavi was under investigation since a month earlier in connection with his ‘BRG token’, an alleged Ponzi Scheme. Officials said at the time that the platform would reopen within two days so users could recover their money. This did not occur
.
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