Binance advises its remaining users in Iran to withdraw their money while the cryptocurrency exchange tries to respect international sanctions.
"If you have an account with Binance and you fall into that [sanctions] category, please withdraw your assets from Binance as soon as possible, "reads an email received in recent days by Iranian users, according to several local sources.
Sepehr Mohamadi, chairman of the board of the Blockchain Association of Iran, said that e-mails like this have been around for months, but their number has increased recently as a result of the renewed US sanctions, which have been activated on 5 November.
At first, Binance, based in Malta, which declined to comment for this article, was primarily closing accounts of users who provided Iranian passports as part of the know-your-customer process (KYC), according to sources in Iran. But this week has also started to warn about accounts connected to Iranian IP addresses to get their cryptography, several Iranian traders said.
"The Iranians are not really able to trust the cryptocurrency trade," Nima Dehqan, a researcher for the blockbuster project in Areatak, based in Tehran, told CoinDesk. "It's really not something new."
In fact, BitMex and Bittrex are just some of the many exchanges that have banned Iranian users in the last year, sometimes without reimbursing the encryption they had for these customers.
"It would be difficult [for the exchanges] to serve users in these jurisdictions if they want to serve American citizens, "John Collins, a partner at the Vector FS consultancy firm in Washington, DC, and former Head of Policy at Coinbase, told CoinDesk." It is logical to say that many companies they are looking into the States right now and they are adjusting to US regulation. "
As such, Dehqan said that this forced the Iranian bitcoin community to unite to create local businesses and support networks.
"We actually have cryptocurrency groups in Telegram or WhatsApp for people who want to change their cryptocurrencies in person," Dehqan said. "People must trust one another, it's a community that is a little more united in Iran."
Some vendors even set up physical stores and conducted the traditional KYC, in case the Iranian authorities asked for their activities.
Taking a step back, US regulatory crackdowns against trading platforms like EtherDelta inspired some stock exchanges serving American customers to start being more cautious about KYC requirements. Also, according to SimilarWeb, about 13 percent of the traffic on the Binance website comes from the United States.
"Regulators are starting to focus more on trade," said attorney Nelson Rosario, who specializes in legal issues related to cryptocurrency at Smolinski Rosario Law in Chicago. As for Binance's moves towards risk, he added:
"This is an example of how managing a business involving people all over the world can be extremely complex and it is almost impossible to identify all potential pitfalls in advance".
However, Rosario noted, Binance has no business in the United States and regulators have paid more attention to local companies.
Mining for oneself
Binance is cutting ties with Iranian clients at a time when the Iranian authorities are proceeding with plans for a national cryptocurrency similar to the petro of Venezuela.
Mahmoud Eskandari, a Binance user and blockchain developer in Tehran, told CoinDesk that he worries the government that he wants to "completely dominate the economic crisis" by controlling the cryptography market.
These concerns are pushing many Iranian crypto fans to establish small mining operations, rather than relying on external platforms.
However, the narrow range of trading options has not dampened the crypto-fever among the Iranians.
Dehqan said that Binance's news is not having a dramatic impact on the bitcoin community of Tehran because more Iranians undermine the cryptocurrency or hodl their assets, to protect themselves from inflation, rather than embarking on speculative trade. He added:
"The sanctions do not have much effect on the extraction of bitcoins, but it is actually profitable in Iran compared to other countries".
In the last year, Dehqan claimed that Areatak has received requests for over 1,000 colocation mining contracts, creating the infrastructure and charging miners with a percentage of their revenues, because electricity is so cheap .
Dehqan has estimated that the extraction of cryptocurrencies in Iran requires a quarter of the cost of electricity, less than one cent per kilowatt hour, compared to mines in most industrialized countries.
"Many people from other cities come to Tehran to buy mining devices," said Eskandari, who extracts both bitcoin and ethereum. "My friend sells Antminers and mining devices in Tehran, he sold about 100 devices last month."
According to Iranian news, local regulators are also developing a legal system for counting this thriving mining industry.
"We have a lot of investors who have visited Iran from the world mining summit," said Dehqan. "All in all, you can actually access the cryptocurrency purchase in Iran and that's the only thing that matters."
Anna Baydakova contributed to the report.
Image of Iran via Shutterstock