In this report, I will explore the increasing use of Bitcoin by Iranians who face economic challenges and scrutiny from the government and foreign powers. My goal is to describe how Bitcoin can be a tool to protect freedom and preserve value in a complex economic and political context.

Preface

For many people who are not familiar with decentralized financial infrastructure, commonly known as blockchain or cryptocurrency, it can be difficult to understand the importance of Bitcoin to certain communities.

From a Western perspective, people often, perhaps unconsciously, divide the world’s population into two broad categories. The first group is Westerners, who benefit from electricity, drinking water, the Internet and the banking system. The second category is the extremely poor people living on the margins of society.

But the reality is more complex and nuanced. In different parts of the world, there are people who have easy access to the Internet but neither the means nor the need to open a bank account.

Another part of the world, the Iranians, have access to the internet and the banking system. However, the use of these services is subject to strict government control, monitoring and scrutiny.

Forget the Western perspective and we realize that Bitcoin is more than just a speculative asset.

In fact, Bitcoin is a censorship-resistant and anonymous value exchange network. These characteristics give Bitcoin a social function that its detractors overlook.

In my article “Orange is the new Green,” I highlighted Bitcoin’s role as a catalyst for ecological transformation, refuting arguments that it is an excessively polluting asset. The irony is that this point is often made by those who are at the forefront of policy and investment that produce millions of cubic meters of CO2 every year.

Through this article, I will continue to reflect and try to prove that Bitcoin is also an effective tool against government censorship.

As a French and an Iranian, questioning established authority is a deeply ingrained quality in me. Therefore, I began my research with a desire for revolution and change.

I quickly learned how difficult it is to talk about tools like Bitcoin used to circumvent censorship in the Islamic Republic of Iran.

When I tried to collect testimonies on several social networks, I was excluded from certain groups, my information was deleted, and I was even accused of being a government agent.

Of those I contacted, most did not respond or flatly refused to testify.

One of them volunteered to translate my question into Farsi and then share it with other members of the Iranian Bitcoin/crypto community.

Unfortunately, this person has received a lot of criticism for promising to obtain information from people who circumvent the law. After days of hesitation, he finally shared the questions and made it clear that answering them was not mandatory. In the end, 7 people answered the translated questionnaire.

I collected 13 testimonies in total. Although some participants agreed to reveal their identities, I decided not to reveal any names or pseudonyms. The statements and actions described in these testimonies may subject them to government retaliation, including the risk of imprisonment.

Therefore, in the narrative reported in this paper, I will use fictional sources with the most popular names in the country: Ali, Muhammad, Fatemeh, Reza, Zahra, Maryam, Hussein, Nima and Leila.

History background

In January 1979, Iran’s last king, Mohammad Reza Pahlavi, was forced to leave Iran after numerous protests. His departure paved the way for Ruhollah Khomeini, who after 15 years in exile united communists, mujahideen, liberals and democrats.

After returning to Iran, Khomeini announced the end of the monarchy on February 11, 1979, first established a provisional government, and then established the Islamic Republic of Iran on April 1 of the same year.

In November 1979, Iranian students attacked the U.S. Embassy in Tehran, taking embassy staff hostage and accusing them of espionage. The hostage crisis seriously worsened relations between the United States and Iran, leading the United States to impose economic sanctions on Iran.

In 1980, Iraq invaded Iran, hoping to take advantage of Iran’s instability. The war lasted eight years and killed between 600,000 and 1.2 million people, ultimately strengthening the Iranian regime and fueling a martyrdom cult in the country.

The sanctions imposed on Iran have seriously affected Iran’s international relations and economic development. Sanctions have led to high unemployment, especially among youth, and severe inflation in the Iranian Rial.

Daily life of iranians

My purpose is not to assess the rationale for international sanctions, but to provide a more accurate picture of the daily lives of Iranians amid the economic blockade and geopolitical repercussions.

Inflation

Inflation is a direct result of years of economic instability in Iran. The Iranian rial (IRR) has suffered from high inflation for at least half a century, with inflation peaking at 49.7% in 1995 and averaging around 40% annually since 2019. In the past 10 years, the Iranian rial has depreciated by more than 95%.

Inflation rate in Iran, 1960 to 2023 - World Bank

Unemployment rate

Official statistics show that the unemployment rate in 2023 will be 7.5%, with the unemployment rate for people under 24 years old reaching 20.5%. However, these figures are controversial and have been accused of being underestimated by the government.

Many Iranians work informally or receive partial informal wages to reduce the burden of taxes and the impact of inflation.

‍About this, Muhammad explained to me:

Let’s say my salary is $500. On the first of every month, my employer officially pays me $150 to reduce expenses. He then informally pays the remaining $350.

banking system

Sanctions imposed on Iran by the United States and the European Union severely restrict Iranians’ financial transactions. They are unable to send or receive money from abroad and are restricted from purchasing international products or services.

To circumvent these restrictions, Iranian companies often open subsidiaries and bank accounts abroad, particularly in Dubai and South Korea.

government censorship

In addition to international sanctions, the Iranian government also implements strict censorship, which is manifested in different aspects as follows.

‍Despite widespread invitations to vote, the results are always rigged in favor of the Supreme Leader, leaving Iranian citizens without any influence over the elites who run the country.

This censorship also extends to the Internet, which is severely restricted in Iran. Iranians cannot access many websites and social networks commonly used in the West. The only way they can circumvent these restrictions is to use a VPN. Encrypted messaging apps like Telegram are one of the few means of free communication. ‍

Speaking of which, Ali told me:

We don’t even have access to the global financial system, and many of the daily activities that young people in rich countries take for granted are not available to us. For example, we have limited access to Spotify. Many may find this funny, but we are fighting two enemies: a domestic enemy that imposes many restrictions on us and takes away our freedoms; and a foreign enemy whose sanctions directly affect ordinary people. life.

It may be hard to believe, but having a free Internet has become our main goal.

protest activity

Since 1979, more than 4,000 Iranian citizens have been killed in various protests and at least 36,000 have been imprisoned.

To better understand the magnitude of these protests, let’s take the killing of Mahsa Amini as an example.

The 22-year-old woman was arrested for improperly wearing a hijab and died of injuries from the police on September 16, 2022. Authorities said she suffered a cardiac arrest, while her family accused police of beating her.

In response, protests broke out, initially locally but quickly spreading across the country. In protest, many women burned their headscarves and cut off their hair.

‍In the face of these movements, the police and military responded with brutal measures, resulting in the death of more than 500 protesters, the arrest of approximately 20,000 people, and the execution of seven of them.

The protests, while centered on women’s rights, reflected widespread dissatisfaction with the existing regime.

How do Iranians position themselves?

Iran is a country full of life. While almost everything is banned and controlled, Iranians always find ways to circumvent every prohibition.

‍The temptation of taboos has always been a fundamental aspect of human nature, and Iranians are no exception. Government bans alcohol? But it’s easy to get. Are certain types of music banned? Nightclubs, rap/rock/metal bands, and more. Banned from social networks? However, almost everyone has an Instagram account. ‍

Until recently, it was nearly impossible for Iranians to circumvent banking sanctions or obtain a store of value. Bitcoin is changing this game.

Despite the government’s stance and the image the media may spread, the Iranian people are very open to the West. In total, it is estimated that nearly 4 million Iranians have emigrated abroad, including 1.5 million to the United States and 1.2 million to Europe.

Although the word “republic” appears in Iran’s official name, the Iranian government is far from a democracy. Many immigrants and opponents of the Islamist regime believe Iranians are “sleeping” because of their religion and idealize the regime’s supreme leader.

Regarding this issue, Ali told me:

The desire for change in Iran has intensified following massive public protests last year over the government’s killing of Mahsa Amini. Although many professionals and intellectuals have left Iran and Iran is currently facing a shortage of skilled labor, we all hope that the dark days will pass and show the world that Iranians are a peace-loving people who want to communicate with the rest of the world. nationality. We want to show that these people are different from the Islamic regime. It is worth mentioning that most Iranians do not consider themselves Muslims and have abandoned their faith.

How do Iranians use Bitcoin? Why?

Bitcoin is a decentralized digital currency that is censorship-resistant. Unlike traditional monetary systems, Bitcoin operates without a central authority, instead verifying transactions through a network of independent nodes. This structure makes it extremely difficult for a single entity to block or restrict transactions, ensuring greater financial freedom for users.

‍ Other blockchain infrastructure, such as Ethereum, benefit more or less from the same censorship-resistant properties and allow the exchange of tokens backed by another asset, such as Tether’s USDT. USDT is a stablecoin designed to maintain parity with the U.S. dollar.

Unlike the U.S. dollar and fiat currencies, Bitcoin is scarce, which means there is a long-term upward trend in Bitcoin value.

Fight against inflation

One of the main reasons Iranians use Bitcoin and cryptocurrencies is to combat inflation. ‍

With inflation approaching 40% in 2023 and reaching 95% over the past 10 years, the Iranian rial is not a currency that can be held long-term.

Iranians have the option of converting rial to US dollars. While feasible, it is a complex and expensive operation, mainly due to international restrictions.

Therefore, USDT is one of the most stable currencies in the world that allows Iranians to hold and exchange it.

However, using USDT is not without risks. Under the stewardship of Tether, USDT has diverged from the actual value of the U.S. dollar on multiple occasions. Other stablecoins similar to USDT have also lost parity with the US dollar and never recovered, and this phenomenon may also happen with USDT. ‍

Additionally, if Iranian use of USDT attracts attention in the United States, Tether may be required to freeze all Iran-related tokens, which would prevent its users from continuing to use it and result in the loss of their funds.

‍It’s also important to note that the U.S. dollar is also affected by inflation, although not as much as the Iranian rial. Over the past 10 years, the U.S. dollar has lost about 25% of its value. ‍

As for Bitcoin, although it is volatile in the short term, it has proven to be the asset that best retains its value in the long term, rising from about $3,000 in 2018 to nearly $50,000 in January 2024.

Bitcoin offers greater protection than the Iranian rial, and its current value exceeds 22 billion rial, an unprecedented record.

Bitcoin price against USD (orange) and against Iranian rial (blue) - Nobitex

Here are some comments about inflation:

I invest in Bitcoin to preserve value and avoid loss of principal. -Fatemeh

The key issue here is that cryptocurrencies are primarily used as a store of value in Iran. Iranians often line up to buy U.S. dollar cash, which is now in short supply. After people learned about Tether, their interest in it increased. Currently, there are very few people who are unfamiliar with cryptocurrencies. -Ali

Circumvent Sanctions and Bans

Due to the decentralization of the Bitcoin network and other blockchains, BTC and USDT have become a means of circumventing censorship.

On the one hand, these assets can evade government bans, and on the other hand, users can easily circumvent international restrictions and make transfers and payments abroad.

‍ As a result, many online services and products are purchased with Bitcoin and USDT without declaring them.

Why not declare it? Most of the time, it’s because the government prohibits the purchase of the desired product.

Here are some excerpts from testimonials describing the different ways they use Bitcoin:

Yes, [Bitcoin] has impacted the lives of my close family and friends as well. Government censorship reduces our quality of life. -Fatemeh

My main reason for using Bitcoin is the sanctions and restrictions that Iran has imposed on certain products. This forces me to use cryptocurrency for payment. These limitations apply to others as well, and in my opinion, they should adopt Bitcoin as well. These bans severely impact our ability to live normal lives.

I mainly use Bitcoin to purchase software and transfer money to desired destinations. There are already some stores that accept Bitcoin payments. -Reza

As you may know, Iranians are very involved in Bitcoin because our economy is the weakest 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 of some apartments in expensive areas in northern Tehran is paid in USDT. In Iran, everyone knows they are not supposed to reveal that they own Bitcoin. But almost everyone has some. In Iran, Bitcoin’s political significance is far greater than its economic, social or cultural significance. People mainly use it to oppose the government. -Muhammad

International transfers and purchases with Visa and Mastercard are complex, incur many additional fees, and are subject to sanctions, so Bitcoin solves all these problems. -Zahra

I used Bitcoin to transfer money on the recommendation of a friend. While exchanging Bitcoin for fiat currency wasn’t that simple at the time, for an Iranian, this tool was a godsend. Subsequently, I deepened my understanding of the technology and began exploring blockchain. It’s a fascinating world, especially since I can purchase certain subscriptions with Bitcoin or other cryptocurrencies. -Ali

I first heard about Bitcoin from friends in 1396 (equivalent to 2017), but it wasn’t until 1401 (2022) that I bought it with Bitcoin at a protest for Mahesa Amini VPN. -Maryam

I have used Bitcoin at fast food restaurants and at the dentist’s office, and it is also my store of value. -Hossein

As the Lightning Network grows, there are many stores that accept Bitcoin. -Nima

receive salary

Some interviewees confirmed that they and some of their acquaintances requested payment of all or part of their salary in USDT or Bitcoin.

According to them, Iranians adopt this approach to minimize their tax burden, which can have serious consequences for their savings.

On the other hand, at home we face censorship and government restrictions, which is why we as freelancers use Bitcoin and Tether to generate income. -Maryam

What are the barriers to Bitcoin adoption in Iran?

One of the interviewees, who goes by the pseudonym Stupid Risks, conducted a months-long experiment to identify barriers and assess how easy it would be to introduce new people to Bitcoin. ‍

First, Stupid Risks believes that obtaining relevant information to understand the technical, economic and social aspects of Bitcoin is not particularly difficult for Iranians.

He believes that while speaking English is an advantage, there is enough content on social media (mostly YouTube and Telegram) to simplify Bitcoin and explain how to create and secure a Bitcoin/Lightning wallet, as well as how to use it. ‍

However, Stupid Risks also points out some gaps that can be filled. He believes that building a growing, benevolent community, ideally led by celebrities or influential people, can go a long way. ‍

He explains why this goal is difficult to achieve:

Part of the problem is the ignorance of celebrities and the so-called benevolent media about the importance and power of Bitcoin. Another part of the reason is government restrictions and dangers for domestic Bitcoin users.

Solution: Some of us have to negotiate or even organize get-togethers.

Stupid Risks doesn’t think prolonged power or internet outages are likely even under a regime like Iran’s, but he still thinks it’s a possibility. ‍

In my opinion, the risk of internet outages is often overestimated, especially with the emergence of solutions that allow sending Bitcoin via SMS, such as Machankura 8333.

The main issue raised by Stupid Risks involves misunderstandings about currencies. Many people believe that holding physical currencies is safer than holding digital currencies, and currencies other than the rial are still backed by real assets. ‍

In fact, no country’s currency has been backed by anything since the 1970s. They all depend on government monetary policy and central banks.

Stupid Risks rightly emphasizes that for wider adoption of Bitcoin in Iran, Iranians must understand that although Bitcoin is a digital currency, it is inherently scarce and more reliable than fiat currency.

The first psychological barrier, he said, is that people generally believe in the false dichotomy of “real currency vs. virtual currency” rather than “fiat currency vs. hard currency.”

The last few issues mentioned by Stupid Risks are also common in the West:

• Most investors are attracted by the prospect of profits and turn to cryptocurrencies that are riskier and less resistant to censorship and inflation;

-Iranians insist on having their assets held in third-party custody even though they are aware of corruption in the domestic banking sector and the risk of seizure;

-Bitcoin, as a new currency and technology, cannot understand and learn how to use it effectively due to people’s indifference and lack of curiosity.

Bitcoin Adoption Statistics

While letters of recommendation are important, they are often biased and influenced by the opinions and positions of the people who issue them. ‍

Therefore, I will now refer to a report published by ArzDigital media titled “Iran’s Cryptocurrency Space – 1402”. The report is a statistical study of cryptocurrency usage by Iranian citizens and businesses.

Iran adopts Bitcoin and cryptocurrencies digitally

The following is a non-exhaustive list of statistics, the most important of which are as follows

-25% of Iranians own cryptocurrencies;

-32.2% expressed interest and 29% had owned it before;

-48.9% of non-holders said that they lacked enough relevant information and therefore did not dare to try easily.

Among Iranians who own cryptocurrencies:

-38.10% of people have not invested in other markets;

• 53% are in the red as of November 2023 (Bitcoin below $35,000)

• 61% will invest before 2021;

-82.10% of people invest to fight inflation;

• 21.90% of people use decentralized finance (DeFi)

• 9.60% use cryptocurrencies to transfer or receive money from abroad;

• 7.70% Use cryptocurrencies to purchase goods or services;

• 76.6% believe international sanctions are a barrier to the use of cryptocurrencies;

• 57.20% consider restrictions related to Internet access (such as the requirement to use IP changing tools) to be a barrier;

• 68.10% invest for the long term (months or years, Hodl).

The most common cryptocurrency is Bitcoin, followed by Dogecoin and Shiba Inu in second and third place. Ethereum is only ranked fifth, behind Cardano.

Local exchange platforms have been established with various advantages:

• 84.10% of people use these platforms instead of foreign platforms because they can pay directly in rial;

• 45.5% because legal follow-up is more likely in bankruptcy situations;

• 34.70% of people use these platforms instead of foreign platforms because they can pay directly in rial;

However, these platforms also face some obstacles, not least the high fees. In fact, 52.70% of users believe that withdrawal fees are too high, which is equivalent to the fees charged by Binance in Europe, which costs around $20 for BTC withdrawals.

Regarding fees, one interviewee told me one way to circumvent fees is to perform an “atomic swap” through Boltz, withdrawing BTC on Lightning and then receiving it on-chain. This will save about 90% of the fees normally paid to the platform.

According to the ArzDigital report, if one person were to represent the average Iranian cryptocurrency investor, it would be a 38-year-old man living in Tehran with the following portfolio distribution: 22% hold BTC, 18% of people hold DOGE, 17% hold SHIBA, 15% hold ADA, 12% hold ETH, 10% hold TRON, and 6% hold USDT.

Iran’s Cryptocurrency Laws

Regarding cryptocurrency regulation in Iran, the government has implemented several important measures to regulate the industry. The following is an overview of the main current regulations:

• Bitcoin Mining Regulation: The Iranian government now requires Bitcoin mining to obtain a license, with the aim of regulating the activity, especially in terms of energy consumption and compliance with established standards. Specific guidelines regarding the power supply to Bitcoin miners have been released.

• Exchange transaction limits: The Central Bank of Iran imposes limits on the amount of deposits and withdrawals on cryptocurrency exchange platforms. These platforms need to obtain licenses to officially operate and ensure they comply with regulatory standards.

• Cryptocurrency taxes: Currently, there is no tax on buying and selling cryptocurrencies in Iran. While Parliament had proposed taxing cryptocurrency transactions, the measure was defeated, largely due to the lack of a clear legal definition of cryptocurrencies.

The public has mixed views on the attitude of government agencies towards cryptocurrencies: 11.9% of respondents want maximum liberalization of the use of cryptocurrencies, while 65.0% favor moderate legislation and controls in this area . Finally, 23.1% favored limiting the cryptocurrency space as much as possible.

future outlook

Bitcoin, along with other cryptocurrencies, has proven in part a vehicle for Iranians to circumvent government censorship, international sanctions and the severe inflation that has affected the country for decades. ‍

For Iranians, Bitcoin is not only a speculative asset but also a means of escaping government control. The growing adoption of Bitcoin in Iran is a promising sign for the country’s future. This is not just because I think Bitcoin will increase in value and enrich its users, but primarily because it represents a form of currency necessary for democratic life.

‍However, there are some disadvantages to the use of Bitcoin:

• Its volatility: Although BTC is often seen as a hindrance, its volatility will decrease with its adoption. Furthermore, its impact becomes less important in the context of a long-term investment strategy;

-Novelty: Educating users to use Bitcoin safely and prudently is crucial;

• Transaction fees: When transaction fees are high, users will move to more centralized wallets (exchange platforms or custodial wallets), and solutions such as Phoenix Wallet, Fedimint and others are solving this limitation.

In addition, Iran’s economic situation is undergoing significant changes. After Iran joins the BRICS and forms an economic alliance with Russia, it will further open up to the outside world and get rid of Western restrictions.

By integrating Bitcoin, or simply by tolerating its use, Iran could facilitate the emergence of a parallel economy. This would be an opportunity for Iran to benefit from this new economic dynamic while freeing the Iranian people from the restrictions imposed on them by the international community.

Fiat currencies are designed by elites and for elites. The very concept of printing money excludes the people, even though it is the people who give value to this means of exchange. Bitcoin is an asset that is scarce, easily portable, transferable, and divisible, making it an ideal candidate to be the perfect currency. In addition, Bitcoin can resist censorship and liberate those who are not born at the right time. ‍

In addition to showcasing the use of Bitcoin in Iran, the purpose of this article is to highlight the injustices entrenched in our economic and political systems. This system relegates some people to the margins of society, while others are deemed more “worthy.”

To add a touch of poetry, I will quote Figaro’s soliloquy from literature: Figaro points out to Count Almaviva that his luck and merit are simply that of being born into the right family, in the right place and at the right time:

What have you done to have so much good? You have gone through a lot of hard work to be born, and that’s all: other than that, you are just an ordinary person! And I, struck by a thunderbolt, lost among the inconspicuous crowd, had to use more knowledge and calculations in order to survive than it would have taken me to govern the whole of Spain for a hundred years, and you want to compete with me! -Beaumarchais, “The Marriage of Figaro” (Act 5, Scene 3)

Bitcoin is a peer-to-peer payment network. By definition or code it does not differentiate between users. Humans cannot provide such a service because they are often driven by the pursuit of wealth, and Bitcoin is designed to be impartial.

Even though it seems complicated at first glance, I think it is necessary to take the time to study it, pay attention to it, adopt it, discuss it, because Bitcoin can at least allow our neighbors to “survive”.

Disclaimer：

1. This article is reprinted from [Followin], All copyrights belong to the original author [Marius Farashi Tasooji, Compiler: Qin Jin, Carbon Chain Value]. If there are objections to this reprint, please contact the Gate Learn team, and they will handle it promptly.
2. Liability Disclaimer: The views and opinions expressed in this article are solely those of the author and do not constitute any investment advice.
3. Translations of the article into other languages are done by the Gate Learn team. Unless mentioned, copying, distributing, or plagiarizing the translated articles is prohibited.