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Kraken Bows Down Before US Treasury, Agreed To Remit $360k

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Kraken, the world’s second-largest crypto exchange by market cap has reached a settlement deal with the U.S. Treasury Department’s Office of Foreign Assets Control [OFAC] over allegations of serving customers in Iran, as per the statement released by OFAC.

The U.S. Department of the Treasury’s Office of Foreign Assets Control [OFAC] today announced a settlement with Payward, Inc. d/b/a Kraken (“Kraken”), a Delaware-incorporated virtual currency exchange with operations in the United States and elsewhere.  

As part of the settlement with the OFAC, Kraken agreed to pay a fine of $362,158.70 and also consented to invest an additional $100k in certain sanctions compliance controls.  

The press release cited Kraken’s failure to implement relevant geolocation tools, including an automated internet protocol [IP] address blocking system, in a timely manner.

OFAC claimed that the US-based trading platform exported services to customers who looked to be in Iran and used Kraken’s platform to transact in digital currency.

Further details revealed that the firm allegedly processed over 820 transactions that came to be around $1.68 million on behalf of customers who may have been located in Iran.

The potential breaches, according to the Department of the Treasury, were “non-egregious and willingly self-disclosed” between October 14, 2015, and June 29, 2019.

OFAC argued despite Kraken having a sanctions compliance policy in place to prevent users from signing up in restricted countries, the platform “failed not to impose IP address blocking” on activity across its platform at the time of the alleged violation.

Kraken Failed To Implement “IP address blocking”

This failure on the part of Kraken emboldened some users to register from locations that were not subjected to US sanctions and then proceed to conduct transactions from sanctioned locations, like Iran, according to IP address data obtained by the Treasury Department.

Marco Santori, the platform’s chief legal officer told in an interview that the firm has since made a number of changes, including adding geolocation blocking to stop users from accessing the site in prohibited locations and hiring a specific head of sanctions.

Additionally, the business has spent money on staff training on sanctions compliance and has put in place “blockchain analysis tools to assist with sanctions monitoring.”

The leading exchange was among other major industry players like Coinbase, Binance, Gate.io, etc to publish proof-of-reserves, including liabilities, as part of their audits.

Bitcoin Advocate arrested by Iran Security Forces

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Between Bitcoin, other cryptocurrencies, and authorities, there has always been a cold war. Regulators, including the U.S. Securities and Exchange Commission, have been imposing only minor restrictions and prosecuting egregious frauds for more than ten years while mainly permitting cryptocurrency to operate on its own. But when Gary Gensler was chosen by the Biden administration to lead the SEC, he made clear early on that he intended to adopt a more strict stance.

This mindset has taken many different forms, even outside of Gensler’s official sphere of influence. The SEC increased the number of employees in its enforcement division who were responsible for overseeing cryptocurrency in May. The Office of Foreign Assets Control’s sanctions against the Tornado Cash privacy software has caused the greatest concern in the sector and will be challenged in court. And not too long ago, Grayscale Investments filed documents acknowledging that the stellar, zcash, and horizen cryptocurrency tokens “may currently be” securities in answer to an SEC inquiry.

Although authorities may dislike virtual currencies, some of this greater scrutiny may just be a result of crypto’s increasing stakes and importance.

However, denying the obvious won’t change the fact that these watchdogs for the cryptocurrency industry were already prepared to regulate until they were given a handy mandate by the vast amount of seriously destructive fraud and reckless experimentation taking place in the crypto-verse. That was always a risk, but during the bull market of 2020–2022, it became much more so due to the growing public exposure to cryptocurrency speculation.

Iranian Bitcoin educator arrested by Nation’s Security Forces

To add to the obvious global intimidation of the crypto-verse, it has come to light that well-known Iranian Bitcoin advocate, Ziya Sadr has been arrested by the Security Forces of Iran on 19 September 2022, and has not been released yet.

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Ziya Sadr, Bitcoin Advocate

According to Nima Yazdanmehr, a friend of Sadr, Sadr was detained on the streets of Tehran nearly a month ago and is still being held. The arrest happened in the midst of significant anti-government demonstrations after the state-sanctioned murder of 22-year-old Mahsa Amini.

Sadr is a well-known Bitcoin evangelist and YouTuber who also teaches about the currency. He has encouraged ways to use Bitcoin for private transactions and translated Bitcoin literature into Farsi.

In the weeks following the protests, the Iranian regime jailed thousands of Iranian individuals and activists, including Sadr. However, there have been no official statements of whether Sadr’s support for Bitcoin has anything to do with the Iranian government’s interest in him.

Iran: Illegal crypto miners can no longer avail subsidized electricity

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The Iranian administration has decided to pass new legislation, increasing penalties to prevent illegal cryptocurrency mining from using subsidized electricity, an official with the country’s Power Generation, Distribution, and Transmission Company [known as Tavanir] announced.

According to the Tehran times coverage, the increase in punishments includes rising fines by a minimum of three and a maximum of five times, imprisonment of the offender, and even cancellation of their business license for repeated violations.

“Any use of subsidized electricity, intended for households, industrial, agricultural, and commercial subscribers, for mining cryptocurrency is prohibited,” Mohammad Khodadadi Bohlouli, an official working with the power firm said.

Misusing subsidized electricity to mine cryptocurrencies reduces the quality of the electricity supply in the national grid and damages peoples’ electrical appliances such as televisions, refrigerators, air conditioners, and so on, the official noted.

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Iran: Illegal crypto miners can no longer avail subsidized electricity 3

Following the Iranian government’s approval of cryptocurrency mining as industrial activity in 2019, numerous mining rigs cropped up across the nation, thanks to the extremely low-cost electricity. In January 2020, the Ministry of Industry, Mining, and Trade has issued over 1,000 licenses for such mining units.

But amongst them, some unauthorized miners also started mushrooming which used household electricity, causing major issues for the country’s electricity industry which is already facing serious problems created by drought and reduced rainfall.

Finally, in May 2021, the Iranian Energy Ministry’s Spokesman for the electricity sector Mostafa Rajabi Mashhadi warned that those cryptocurrency miners using subsidized electricity would have to pay a heavy fine if identified.

In addition to that, those miners must also compensate for the damages they cause to the electricity network, Rajabi Mashhadi added.

Iran’s Crypto-Rial would go live soon

With regards to crypto legalization, the west Asian country does not recognize cryptocurrencies as a means of payment, a high-ranking government official has emphasized. His statement came as the Central Bank of Iran announced rules for the issuance of digital coins in the country, five days ago.

Dubbed “Crypto-Rial,” the pilot phase will begin in the near future. Without giving any specific dates, the Central Bank stated that the Crypto-Rial would play a bigger role and would provide a competing platform for stablecoins used globally.

OpenSea Blocks Iranian Users Quoting US Sanctions

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OpenSea, an NFT marketplace based in the United States, has blocked users based in Iran, according to reports from frustrated collectors and creators.

An OpenSea spokesperson had the following to say about the company restricting users from sanctioned countries:

“Users and territories on the United States’ sanctions list are barred from utilizing OpenSea’s services, including purchasing, selling, and transferring NFTs, and our Terms of Service expressly prevent sanctioned users or users in sanctioned areas from using our services.” We have a zero-tolerance policy for sanctioned persons or businesses and anyone who lives in sanctioned countries using our services. If we discover individuals who are breaking our sanctions policy, we immediately prohibit the accounts linked with them.”

Iranian NFT artists expressed their agitation to OpenSea

More than five Iranian OpenSea customers have reported the problem. Three of them verified that they utilized the service while in Iran.

Bornosor, a well-known Iranian NFT artist, expressed his dissatisfaction on Twitter.

When Arman, an user from Iran, tried to enter the marketplace, he received an error 404 notice. Arefeh Norouzii complained that their verified account was deleted “without reason” today.

RyanW, a moderator on the nft platform’s Discord server who frequently answers support inquiries, had stated this morning that he was “not aware of any Iranian account bans.”

OpenSea responded to the pile of complaints that they received on Twitter.

In recent months, several people have expressed their dissatisfaction with OpenSea. Despite billions in monthly sales, the site continues to experience issues, including a recent $1.7 million external phishing attempt, a lawsuit over an allegedly “stolen” Bored Ape NFT, and $1.8 million reimbursed to consumers who lost NFTs through a listing scam.

The company’s activities have reignited debate over whether huge blockchain-based enterprises and services are sufficiently decentralized, with MetaMask joining in on sanction-based retaliation.

After blockchain development company Infura mistakenly extended the scope of its sanctions-related crackdowns, Venezualan users were accidentally barred from accessing their MetaMask wallets, according to MetaMask’s Twitter account.

This isn’t the first time the bitcoin sector has encountered a problem like this. For instance, owing to US sanctions, an Ethereum software company, ConsenSys, abruptly excluded a group of Iranian students from their coding academy in November 2021.

Since its launch, OpenSea has hosted over $22 billion in sales, making it the world’s largest NFT marketplace.

Iran follows Turkey’s footsteps as govt. eyes ban on Bitcoin payments

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The Middle East seemed to be taking down crypto while the rest of the world embraced it. Similar to Turkey, Iran could be banning payments in cryptocurrencies like Bitcoin [BTC].

With the cryptocurrency industry growing beyond expectations, governments across the globe started regulating it. Just as individuals have been taking a deeper look into these assets, officials wanted to jump on to the bandwagon. While the crypto scene in various countries remains uncertain, a few other regions have decided to ban these assets.

For several months now, Iran has been trying to regulate the crypto-verse. The government seemed to have decided to ban payments in crypto while supporting mining and other aspects.

Iran’s crypto regulations

As per a news portal, Iran’s Economic Commission had reportedly drafted a plan titled, “Support for cryptocurrency mining and organizing the domestic market for exchanges.” At the same time, this bill gives the Central Bank of Iran the supreme power to regulate the exchange of crypto across the country.

With great power comes great responsibility. The aforementioned committee decided that it was best to prohibit the citizens of Iran from engaging in crypto-related payments. The bill reportedly suggested that Iranians were obligated to use one “national” currency instead of cryptocurrencies.

This did not seem to interfere with the mining farms in the region. The bill was all in for crypto mining. However, any platform that wished to indulge in crypto mining had to seek the approval of the Ministry of Industry, Mine, and Trade.

With China’s big crypto takedown, crypto mining firms have been migrating to different places. Just last week, Iran’s Ministry of Industries, Mining, and Trade issued licenses to about 30 crypto mining farms.

Previously in April 2021, Turkey went on to ban payments in crypto. The announcement from the Turkish government read,

“The purpose of this Regulation is not to use crypto assets in payments, not to use crypto assets directly or indirectly in the provision of payment services and electronic money issuance, and payment and electronic money institutions to platforms that offer trading, custody, transfer or issuance services for crypto assets or It is the determination of the procedures and principles regarding not mediating the fund transfers from these platforms.”

Iran could be mirroring a similar notion.

Iran confiscates 7,000 Bitcoin miners operating illegally

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Iranian authorities have reportedly confiscated 7,000 Bitcoin [BTC] mining machines that were functioning illegally in the country. According to the state media, this happened to be Iran’s largest seizure of cryptocurrency mining machines to date. The machines were found in a deserted factory west of the capital Tehran.

This comes in the backdrop of Bitcoin’s hash rate taking a massive hit, an event that was spurred by a 90% shut down in China’s cryptocurrency mining space, after years of extravagant mining.

Iran’s Cryptocurrency Mining Environment

Iran considers cryptocurrency mining as an authorized activity provided the miners acquire a license from the country’s Ministry of Industry, Mine, and Trade. The country provides cheap power but the miners are required to sell their Bitcoins to the central bank. Tehran also enables cryptocurrencies mined in the country to be used to compensate for imports of authorized goods. These moves by lawmakers have managed to attract miners of late.

Even with these provisions, the authorities claim that many miners flout the rules and keep operating in the country without obtaining a proper license.

Interestingly, the latest news comes a month after the western Asian country had announced banning all cryptocurrency mining rigs, including the legal ones, until the end of the sixth Iranian calendar month on the 22nd of September amidst widespread power outages across the country.

During this time, President Rouhana had also claimed that 85% of crypto mining in the country was operating illegally and unlicensed. Since then, the authorities have been on the lookout.

Besides, a recent study by blockchain analytics company, Elliptic revealed that nearly 4.5% of all BTC mining takes place in Iran and the country is using cryptocurrency to dodge sanctions imposed by other countries. In addition to that, Elliptic also disclosed that crypto mining needed the equivalent of around 10 million barrels of crude oil a year, or 4% of total Iranian oil exports in 2020.

Iran’s Licensed Cryptocurrency Miners To Aid Imports

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Gone are the days when cryptocurrencies and especially Bitcoin was viewed as a mere darknet currency. The world seems to have realized the value of these assets and have become more accepting of the same. The Iranian government seems to be the latest country to exhibit its keenness towards crypto.

Bitcoin Miners To Facilitate Imports

The country’s Iranian Students’ News Agency [ISNA] recently reported that a new set of regulations pertaining to crypto were put into place in Iran. Individuals who engage in Bitcoin mining were required to fund imports. The central bank of the country would be taking over the operations of receiving and converting crypto in order to aid the imports of the country.

All the miners that are legally registered in the country were to abide by the latest regulation. Both the Central Bank of Iran [CBI] along with the Ministry of Energy had put forth this idea. As per the latest law, the miners of the Middle Eastern country would be obligated to sell the mined tokens to Iran’s central bank.

Furthermore, a limit is set for the mining processes. The report highlighted that the government would take into account the amount of subsidized energy used by a miner along with several other factors. An elaborate document on the instructions pertaining to this would shortly be presented by the Ministry of Energy.

Iran came out as a crypto-friendly country last year after its government legalized mining. Yet, certain laws proposed by the country makes it a rather tumultuous region to trade crypto.

Additionally, the fact that economically repressed countries steer towards crypto has been surfing the industry. Countries like Venezuela have been affirming the same by widely adopting crypto. Iran’s economy took a hard hit after the United States imposed sanctions on the country. The COVID-19 pandemic disrupted almost every market all over the globe, Iran wasn’t spared either. The latest inclination towards crypto could have been stimulated by the distress in Iran’s economy as well as the ever-rising value of the crypto industry.

Crypto Mining Operations in Iran extend to Electric Power Plants

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The Government of Iran has recently approved crypto mining operations by power plants in the country. According to reports, Mostafa Rajabi Mashhadi, who serves as Deputy Head of the Power Generation , Distribution and Transmission Company of the country, or Tavanir, has confirmed the approval as he addressed the IRNA on Monday 27 July.

Iran is setting up a Bitcoin mining hub after the country’s subsidized electricity consumption and now miners are setting up a camp. Mashhadi further outlined the regulations that power plants must adhere to in order to operate cryptocurrency mining operations in the Islamic country.

Power plants must comply with set crypto mining operations tariffs

According to Mashhadi, power plants are expected to apply for crypto mining licenses to run their operation. Licenses are to be given to individual power plants by the Ministry of Industry, Mine and Trade.

Power plants are also required to fully comply with set tariffs on electricity consumption as far as crypto mining is concerned. Recent data show just how cheap miners pay for electricity consumption in Iran where one kilowatt of electricity is charged for as low as $0.01 to $ 0.05. The rates are expected to quadruple during the summer season, a situation that forced Tavanir to announce that the Iranian government had decided to reduce up to 47% on all tariffs on the electricity consumption by miners more so during the high seasons.

Allegedly 14 cryptocurrency miners have recently obtained crypto mining licenses to operate in the country. Each of them will have an electrical capacity of 300 megawatts. It is also worth noting that more than 1,000 more licenses have already been issued with permits.

Mashhadi also urged the general public to report any illegal crypto mining operations to the authorities, promising that the government would provide a reward for their actions.

Iranian president proposes a Muslim digital currency

Iran’s commander in chief, Hassan Rouhani has rallied Muslim faithfuls to unite; and come up with their very own Muslim cryptocurrency. He has also voiced his support for a national crypto mining project that he believes will further propel the country to thrive economically amid the current U.S sanctions that face them.

Iran Currency Smuggling Laws to Restrict Cryptocurrency Exchanges

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The Iranian government has moved to make digital currency channels to markets more high-risk and bemusing than before. According to a local news outlet, ArzDigital, the Iranian legislators submitted a proposal to add cryptocurrencies to Iran Currency Smuggling laws and foreign fiat exchange regulations.

The aftermath of the potential inclusion of digital currencies; is that Iranian investors face a bigger threat of being indicted by local authorities or face sanctions from the Americans. The legislation would require cryptocurrency exchanges to secure a license from the Central Bank of Iran, and comply with legacy foreign currency exchange regulations.

Exchanges to adapt to fiat Iran Currency Smuggling laws

It is unclear how the current cryptocurrency exchanges would adapt blockchain technology to the Iran fiat norms. However, it is apparent that the Iran administration is seeking to get rid of  capital outflow through preventive justification to shut down or punish local cryptocurrency exchanges.

Nevertheless, the country’s market does not strictly consist of local, over the counter players. In contrast to forex exchanges, a number of cryptocurrency businesses operating in Iran are lawfully regulated in other nations. It is still not clear how the potential licensing system will apply to the decentralized ecosystem.

Outside pressure?

For instance, KingMoney and Ubyte are exchanges owned by an Iranian businessman,Reza Khelili Dylami, but regulated under Swedish regulations. These two exchanges have in the past been earmarked as scams due to ties with Iran. Although the exchanges are not licensed in Iran, they have been efficiently facilitating cross-border payments with Ubyte transacting over $13.8 million with native exchanges as per a Chainalysis report.

It’s still blurry whether Trump’s government is pressurizing Iran in order to avoid international trade sanctions. However, it’s not clear how exchanges would circumvent sanctions in future; if they are registered and monitored by the Central Bank of Iran.

Iran Issues 1,000 Licenses To Crypto Miners

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As per sources, the government of Iran has allowed licenses to over 1,000 cryptocurrency mining entities. These licenses are issued by the Iranian Ministry of Industry, Mining, and Trade. This decision has given benefits to large firms established in the country. On the contrary, many small investors are away from the project due to higher electricity taxes which have proved to impede them.

 In an interview with IBENA news agency, an official with ICT Guild Organization of Iran said that the industry of cryptocurrency mining is new and has attracted many people in Iran towards itself. Amir Hossein Saeedi Naeini stated that:

 “The Ministry of Industry, Mine and Trade has issued more than 1,000 licenses for cryptocurrency mining in the country.”

 Saeedi Naeini further added that Iran’s researches show that the crypto mining industry can generate $8.5 billion for the economy.

 Electricity Costs – A Leading Impediment

 As the country is grappling with economic problems and the U.S. has sanctioned, Saeed Naeini believes this decision will help improve Iran’s economy. However, he discussed that the electricity cost is a leading impediment for the miners in the country. Moreover, a high number of large mines have been established. To the news agency, he said:

“High electricity tariffs plus stringent regulations have made the sector less appealing for small investors.”

 He said that the industry’s operating conditions should be in a position so that everyone, from large to small firms, can enter in it. Further, he emphasized that modification in electricity costs and terms could help boost the cryptocurrency mining industry and can generate a significant amount of revenue.

 Cryptocurrency Mining Law of Iran

 The cryptocurrency mining industry of Iran is established last year and was officially recognized by the government of Iran. It is necessary that ahead of operations, crypto miners should have a license issued by the Ministry of Industry, Mine, and Trade.

 Furthermore, the decision of recognizing the industry faced severe criticism by several authorities in the government. The authorities accused crypto miners of consuming more electricity. Last year, in June, it was reported by the state’s television that the authorities had seized about 1,000 mining machines. These mining machines were seized in two deserted factories on the charge of consuming subsidized electricity of the government.

 However, the official Saeedi Naeini said to IBENA that debate is under discussion for creating a favorable environment for the cryptocurrency miners.