State-Controlled Crypto Mining in Iran: How the Government Uses Bitcoin to Bypass Sanctions

Iran doesn’t just allow cryptocurrency mining-it controls it. While most countries either ban crypto mining or leave it to private companies, Iran has turned it into a state-run operation, with powerful military and political groups running massive mining farms that drain the country’s electricity grid. This isn’t about innovation. It’s about survival.

How Iran Turned Crypto Mining Into a Sanctions Lifeline

In 2018, Iran made cryptocurrency mining legal-not to embrace digital currency, but to escape U.S. sanctions. With banks cut off and oil exports blocked, the government needed a way to convert value into dollars or euros without going through traditional financial systems. Bitcoin mining became the answer.

The Islamic Revolutionary Guard Corps (IRGC) and organizations loyal to Supreme Leader Ali Khamenei moved quickly. They partnered with Chinese firms to build huge mining facilities, often hidden inside military bases or on government land. These operations didn’t just use electricity-they hogged it. One facility in Rafsanjan, Kerman province, alone uses 175 megawatts of power. That’s enough to light up a small city. And the best part for the operators? Electricity costs as low as 0.004 cents per kilowatt-hour. In the U.S. or Germany, that same amount of power would cost over $2 per kWh.

This isn’t just efficient. It’s a massive subsidy. The Iranian government pays for the power. The IRGC keeps the Bitcoin. And the people? They pay the price in blackouts.

The Power Grid Is Collapsing-Because of Mining

Iran’s energy crisis isn’t just about drought or mismanagement. It’s directly tied to crypto mining. In 2023, national mining capacity exceeded 1,000 megawatts. That’s the equivalent of running over 300,000 homes continuously. And most of that power isn’t going to homes or factories-it’s going to mining rigs.

In the summer of 2024, Tehran saw 14-hour blackouts during a heatwave. Temperatures hit 45°C. People were dying in their homes. Meanwhile, social media posts showed mining farms in the same neighborhoods running at full capacity, their cooling fans humming while hospitals lost power.

One of the most shocking discoveries came in May 2025, when investigators found a massive mining operation hidden under the Shahid Ghorbani Sports Complex in Ahvaz. The rigs were buried in tunnels beneath a cycling track and packed into service rooms behind false walls. They’d been running undetected for over two years. When exposed, public outrage exploded. Iranians weren’t angry at the miners-they were angry at the regime that let them get away with it.

Legal Mining? Only If You’re Connected

The Ministry of Industry, Mine and Trade says mining is legal-if you follow the rules. You need a license. You must use government-approved hardware. You pay 7 cents per kWh. You submit your data to the state.

But here’s the catch: those rules don’t apply to the IRGC or its allies.

Private miners wait 6 to 8 weeks just to get a license. They’re forced to use outdated, inefficient machines that cut their profits by 15-20%. Meanwhile, state-backed operations get free power, unlimited access to the grid, and zero oversight. The system isn’t broken-it’s designed that way.

A 2025 report from MEXC Wiki confirmed what many Iranians already knew: licensed miners are being squeezed out. Power cuts hit legal operations during peak demand, while IRGC farms keep running. It’s not a policy failure. It’s favoritism on a national scale.

The Tether Freeze and the End of Easy Money

Iran’s crypto strategy looked solid-until July 2, 2025.

Tether, the company behind USDT (the most widely used stablecoin), froze 42 cryptocurrency addresses linked to Iranian exchanges and IRGC wallets. It was the largest single freeze in Tether’s history. The move was triggered by intelligence from TRM Labs and the Israeli National Bureau for Counter Terrorist Financing, which had flagged these wallets for money laundering and sanctions violations.

Suddenly, Iran’s main tool for moving money abroad was crippled. USDT was the bridge between mined Bitcoin and real-world cash. Now, that bridge was gone.

The government scrambled. Within days, officials pushed citizens to switch from USDT to DAI, a decentralized stablecoin on the Polygon network. The goal? Avoid future freezes by moving away from Tether-controlled systems. It was a desperate workaround, not a solution.

From Crypto Haven to Crypto Prison

Iran’s Central Bank is now trying to do two things at once: control crypto and kill it.

In December 2024, they shut down all cryptocurrency-to-rial payment gateways. No more buying Bitcoin with Iranian rials through local exchanges. Then, in January 2025, they partially reopened them-but only if exchanges gave the government full access to every user’s data. Every transaction. Every wallet. Every IP address.

It’s not regulation. It’s surveillance.

By August 2025, they added a capital gains tax on crypto profits. Now, if you mine or trade Bitcoin and make money, you owe the state a cut. But again, the IRGC isn’t paying taxes. They’re too powerful to be taxed. Only ordinary citizens and small miners get hit.

The government is also pushing its own digital currency, the “Rial Currency”-a state-controlled digital version of the rial. It’s not blockchain. It’s not decentralized. It’s just another way for the state to track every penny you spend.

What’s Next for Iran’s Crypto Experiment?

Iran’s state-controlled mining model is unsustainable. The energy crisis is getting worse. International sanctions are tightening. Even China, once Iran’s main tech partner, has pulled back under U.S. pressure.

The IRGC can’t keep running massive farms without electricity. The people can’t keep living without power. And the world won’t keep letting Iran launder crypto through stablecoins.

The regime’s strategy is simple: use crypto to survive, then crush anyone who tries to use it to escape.

But survival isn’t the same as success. Iran has built a mining empire-but it’s built on stolen power, hidden corruption, and the suffering of its own people. The Bitcoin it mines might be worth billions. But the cost? A nation left in the dark.