How Bitcoin could help Iran undermine US sanctions

The New York TimesThomas Erdbrink:Stepping from a car into a muddy industrial site in the Iranian desert, a 22-year old European Bitcoin investor raised his voice to be heard over the roar of a gas-fired generator.

His Iranian counterparts — a bespectacled information-technology specialist, a self-described ‘‘hard-core Bitcoiner’’ and the businessman running the site — walked their foreign visitor over to gray shipping containers containing thousands of small computers. When completed and connected to the power grid, the computers would help process a cryptocurrency that, in theory at least, could enable Iran to evade United States sanctions.

The value of Bitcoin, the dominant online currency in the world, is treacherously unpredictable. But it is an emerging front in the economic war between Washington and Tehran.

Iran’s economy has been hobbled by banking sanctions that effectively stop foreign companies from doing business in the country. But transactions in Bitcoin, difficult to trace, could allow Iranians to make international payments while bypassing the American restrictions on banks.

In the past, the threat of United States sanctions has been enough to squelch most business with Iran, but the anonymous payments made in Bitcoin could change that. While Washington could still monitor and intimidate major companies, countless small and midsize companies could exploit Bitcoin and other cryptocurrencies to conduct business under American radar.

The United States Treasury, well aware of the threat, is attempting to bring Bitcoin and the others into line. In recent weeks, in response to an internet fraud caseoriginating from Iran, the Treasury imposed sanctions on two Iranians and the Bitcoin addresses, or ‘‘wallets,’’ they had used for trading in the currency.

The Treasury also has warned digital marketplaces that buy and sell Bitcoin and companies that sell computers used to process Bitcoin transactions that they should not provide services to Iranians. Several well-known trading sites are now blocking buyers and sellers from Iran. Some have confiscated money belonging to clients based in Iran.

“Treasury will aggressively pursue Iran and other rogue country attempting to exploit digital currencies,” the department said in a statement.