US Lawmakers Sound Alarm Over Iran’s Bitcoin Mining Funding Terrorism

US lawmakers Elizabeth Warren (D-Mass.) and Angus King (I-Maine) urged the Biden administration on Wednesday to disclose its strategy for addressing concerns regarding Iran's Bitcoin mining operations, citing potential national security risks.

In their letter addressed to Defense Secretary Lloyd Austin, Treasury Secretary Janet Yellen, and National Security Advisor Jake Sullivan, senators requested information about Iran's crypto mining operations since 2021, including details on how the Iranian government has benefited.

Warren and King emphasized that crypto mining, which involves verifying crypto transactions and generating new tokens, has become increasingly "lucrative" for Iran, despite numerous international sanctions imposed on the country due to its nuclear program.

The first study to estimate Iran's potential profits from evading sanctions via cryptocurrency was published in 2021. At the time, Reuters reported that Iran's bitcoin production would generate revenues close to $1 billion a year, which was echoed in the letter.

"One estimate indicates that Iranian Bitcoin mining could have produced as much as $1 billion in revenue in 2021," the letter said, pointing to Bitcoin mining reportedly generating more than $186 million for Iranian crypto platforms between 2015 and 2021, with Tehran being one of the top eight Bitcoin-producing countries at the time, the lawmakers said.

The senators stated that crypto miners in Iran are required to sell their products to the Iranian central bank, which, in turn, enables the Iranian government to evade sanctions.

As experts have often said, the Iranian government has a self-inflicted “muddled relationship with crypto-currencies”, which have served to obscure various forms of trade, aiding in evading sanctions, while simultaneously presenting avenues for illicit activities.

In 2022, the state’s Intelligence Ministry claimed they blocked over 9,000 accounts belonging to 454 individuals used for illegal or undeclared exchanges of currency and digital currency. Based on the exchange rate during that period, the relevant trades amounted to 600,000 billion rials or approximately $2 billion.

Reports in Iranian media suggest that large-scale crypto mining has been taking place by influential or well-connected networks, as well as some Chinese companies that are using cheap and subsidized electricity in mining farms they set up in Iran. This could have been permitted only by Iran's intelligence services and the Revolutionary Guard.

The senators' warning about Iran's use of crypto mining coincides with the Treasury Department's request to Congress in April, urging lawmakers to pass new legislation authorizing the department to intervene in terrorist financing and sanctions evasion methods that utilize cryptocurrency. As part of that Senate hearing session, it was also revealed that the Islamic Revolutionary Guards (IRGC) has been using cryptocurrency to fund Hamas and the Islamic Jihad of Palestine.

The letter from Warren and King also mentions the benefit that Iran's proxies are gaining from this low-profile trade.

"The Iranian military has used crypto to fund known terrorist groups like Hezbollah, the organization believed to be partially responsible for the January 2024 drone strike in Jordan that killed three US service members," officials said. "Unless we take action, Iran will continue to use crypto to fund attacks against Israel."

In their letter, Warren and King asked the officials to "describe the steps the administration is taking to address threats to US national security posed by Iran’s reliance on crypto mining and cryptocurrency more generally to earn revenue and bypass sanctions."

Furthermore, the senators inquire about the Binance fiasco. In 2022, it was reported that the cryptocurrency giant Binance had processed Iranian transactions worth $8 billion since 2018 – despite US sanctions intended to isolate the country from the global financial system.

The founder and former CEO of cryptocurrency exchange Binance was sentenced to four months in prison this week for violating US money laundering law and failing to comply with sanctions against Iran.