U.S. sanctions against Iran have had a crippling effect on the country. Now, Iranian bitcoin users are feeling the effects of those sanctions after the United States government announced action against two bitcoin addresses used in ransomware attacks.
This past Wednesday, the United States Treasury Department’s Office of Foreign Assets Control (OFAC) announced that two bitcoin addresses were being added to the office’s Specially Designated Nationals sanctions list.
The two bitcoin addresses are linked to Iran nationals Ali Khorashadizadeh and Mohammad Ghorbaniyan. The two were accused of processing 6,000 BTC gathered in a ransomware scheme over the past few years.
These actions mark the first time OFAC has taken action against bitcoin addresses and bitcoin users.
Unfortunately for other Iranian bitcoin users, however, the sanctions have had a negative effect on legitimate crypto operations across the country.
Legal Iranian Bitcoin Users Are Worried About Their Crypto Fortunes Being Targeted
Immediately after the news was announced, Telegram channels across Iran lit up with complaints about privacy violations and the security of bitcoin wallets, as reported by Coindesk.
Coindesk claims its Iranian sources were no longer able to access popular cryptocurrency swap platform ShapeShift after the sanctions were announced – even when using virtual private networks (VPNs).
In other words, the U.S. sanctions are already affecting bitcoin users in Iran – even law-biding users.
CoinDesk also interviewed an Iran-based cryptocurrency miner who described the news as “alarming”. That miner claims the stigma against Iranian bitcoin users negatively affects all bitcoin users in the country. Over the past two years, that miner has been mining bitcoin to support family abroad. The miner relies on cryptocurrency-related profits to support his family at home and overseas. The latest political news has him worried for the future.
Now, Iranians are worried about maintaining access to their bitcoin wallets. It’s unclear how far the U.S. sanctions will reach. Could Iranian wallets be affected? It’s certainly possible when the wallets are online or – worse – held in an exchange.
Today, Iran’s most popular wallets include Electrom, Atomic, Exodus, Samourai Wallet, and Wasabi Wallet.
Wasabi Wallet is particularly prized for its CoinJoin obfuscation feature. CoinJoin sends multiple transactions in batches, mixes them together, then sends the transactions to their intended recipients. This makes it impossible to track the funds on the blockchain from the sender to the recipient, giving Iranian bitcoin users greater privacy.
“Cutting a whole country off from global business is cruel,” claims one Iran-based developer interviewed by CoinDesk earlier this week. That developer acknowledged that laws should curtail criminal activity – but law-abiding bitcoin users should not be affected in this way.
Have You Received Coins from a Sanctioned Address?
Part of the concern of Iranian bitcoin users is that they may have received funds from a sanctioned address. The United States government has sanctioned the two bitcoin wallet addresses used by the ransomware scammers mentioned above. However, there could be further action against the recipients of funds from those wallets.
If the scammers sent their ill-gotten bitcoin to an exchange, for example, and you purchased bitcoin that same day, then your bitcoins could be “tainted” because they were previously used in illegal activity.
That’s why Iranian bitcoiners are worried.
One attorney recommended that Iranian bitcoin users who received bitcoin from the sanctioned addresses should alert U.S. authorities. Iranian bitcoin users, of course, are unlikely to trust the U.S. government with any information.
Iran Has Implemented Crypto-Friendly Regulations
Iran has plenty of cryptocurrency users. That’s why these sanctions could have huge effects on a significant portion of the crypto community.
The country of Iran offers subsidized electricity to its population. This makes cryptocurrency mining surprisingly affordable in the country – more affordable than it would be elsewhere in the world.
Mining operations continue to expand across the country even as bitcoin prices dip. While crypto miners across the world are struggling to scrape by, crypto miners in Iran continue to make it work.
The Sanctioned Bitcoin Addresses Processed More than 6,000 BTC in Ransomware Scheme
There’s a good reason why the United States sanctioned two bitcoin addresses. The two addresses associated with Ali Khorashadizadeh and Mohammad Ghorbaniyan were allegedly used as part of a ransomware scheme.
Here’s how Treasury Under Secretary for Terrorism and Financial Intelligence Sigal Mandelker described it in a statement:
“We are publishing digital currency addresses to identify illicit actors operating in the digital currency space. Treasury will aggressively pursue Iran and other rogue regimes attempting to exploit digital currencies and weaknesses in cyber and AML/CFT safeguards to further their nefarious objectives.”
The two Iranian nationals allegedly facilitated financial transactions related to the SamSam ransomware. That ransomware has targeted more than 200 people and organizations worldwide over the last few years. Victims include hospitals, universities, government agencies, and corporations.
The scheme worked similar to other ransomware attacks: the ransomware would attack a computer or a server, quietly encrypting data and locking it behind a password. Users would be required to pay a fee (in bitcoin) to unlock the files. Otherwise, the files would be deleted.
The Iranian pair allegedly processed 6,000 BTC ($25 million USD) in illicit profits in partnership with the ransomware creators. The two used 40+ different cryptocurrency exchanges, including multiple US-based exchanges, to sell the funds and exchange them into Iranian Rial.
“As Iran becomes increasingly isolated and desperate for access to U.S. dollars, it is vital that virtual currency exchanges, peer-to-peer exchangers, and other providers of digital currency services harden their networks against these illicit schemes,” Mandelker said.
While most agree that ransomware schemes are bad, it seems unfair for an entire country to be targeted because of the actions of two bitcoin users.