Why virtual currency Bitcoin can’t save the Iranian economy

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Got Bitcoin?
Got Bitcoin? Probably not.
Image: AP Photo / Vahid Salemi

After decades of sanctions on Iranian trade, sanctions restricting the flow of money in and out of Iran have inflicted significant damage on the Iranian economy. That owes much to the Belgium-based Society for Worldwide International Financial Transfers (SWIFT), which in March agreed to block any Iranian banks blacklisted by the European Union from using its international payment systems. Not long after the SWIFT cutoff, things started going rapidly downhill for the Iranian rial, suggesting that it has become much tougher for Iran to get hold of the hard currency it has used to prop up the rial.

Now Bloomberg Businessweek has an interesting take on how a few Iranians are looking at using the anonymous electronic payment system Bitcoin to poke holes in the curtain of sanctions that separates the Iranian economy from most of the world.

Iranian-American bitcoin consultant Farzhad Hashemi recently traveled to Tehran and talked up bitcoin to his friends. “They are instantly fascinated by it,” he says. “It’s a flash for them when they realize how it can solve their problems.” Iranians working or living abroad can send bitcoins to their families, who can use one of the online currency matchmaking services to find someone willing to exchange bitcoins for euros, rials, or dollars. Bitcoins are useful to Iranians wishing to move their money abroad, either to children studying in Europe or America or simply to stash cash in a safe place.

Very useful—if you can use it. But that’s easier said than done for Iranians. As this report from Forbes outlines, software downloaded from US sites is subject to US export controls, and software that uses the kind of encryption Bitcoin does is banned from export to countries covered by sanctions. There are ways to get around the blockage, but you have to be pretty technically savvy:

Other Bitcoin “experts” have alluded to alternative methods of downloading the Bitcoin client such as using non-U.S. independent mirrored sites, Virtual Private Network (VPN) for IP address masking, Tor if your country has an exit node, or BitTorrent file sharing.

And more in the same vein. The short version: for most Iranians, Bitcoin isn’t a way out.