LocalBitcoins Bans Bitcoin Buying in Iran in Blow to Rising Crypto Commerce

LocalBitcoins has officially shut off service for Iran-based users, a move that follows weeks of rising rial trading volumes on the platform.

The Helsinki-based peer-to-peer exchange has not explicitly said why Iranians are suddenly being cut off from its service, though U.S. sanctions are almost certainly the cause.

News of the move first circulated across local language Telegram channels earlier this week that the exchange had blocked Iranians. Users reported encountering problems in posting new trades and updating previous ones on the website.

“If you have an account already, you will be able to withdraw your bitcoins, but you will not be able to use the platform for trading,” reads a response by LocalBitcoins to an Iranian user that has circulated in social media and local news websites.

A message also appeared on the platform’s Iran country page that read: “Unfortunately, LocalBitcoins is currently not available in your selected region.” On Twitter, the exchange told several Iranian users: “Our services are not available in your region for risk-based reasons.”

LocalBitcoins has been perhaps the most popular bitcoin trading website among Iranian users, as it doesn’t require international credit card information – something Iranians have been bereft of for decades – and allows users to pay with their local bank accounts.

According to Iranian users, the website was also open to reviewing local bank account documents to resolve potential problems, signaling that they have advisors familiar with the largely isolated Iranian banking system.

Moreover, LocalBitcoins was trusted by Iran-based bitcoin users because it holds funds in escrow until both sides have given final confirmation, thereby ensuring transaction safety and lowering fraud.

“Since I traded in relatively high volumes, LocalBitcoins was my best option because I could find good offers with real people,” bitcoin trader Soroush Hakimi told CoinDesk.

He continued:

“In local exchanges, rates are unfavorable in many instances while total volume of assets is low. For instance, you can barely find two bitcoins for sale in any given day.”

Sanctions a likely cause

LocalBitcoins did not respond to several requests for comments by CoinDesk on the reasons behind its decision to ban Iranians. But almost undoubtedly, the escalating “maximum pressure” campaign of the U.S. against Iran has prompted the Finnish website to block Iranian users.

Just over a year ago, U.S. President Donald Trump unilaterally withdrew from Iran’s nuclear deal with world powers, announcing reimposition of new rounds of stringent economic sanctions.

Legitimate Iranian crypto users have already felt the sting of sanctions several times during the past year as multiple exchanges, including Binance, Bittrex and ShapeShift have stopped offering services.

According to Milad Jahandar, CEO of Iranian fintech Bahamta, the elimination of Localbitcoins as one of the few remaining viable options for Iranian bitcoiners will lead to more fraud in cryptocurrency-related commerce.

“Users will be forced to resort to person-to-person transactions and trusting each other, which increases risks of fraud, sets back the local community, and delays bitcoin prevalence,” he told CoinDesk.

Jahandar also believes that excluding users from any country due to political reasons runs counter to the very decentralized nature of bitcoin.

“Bitcoin is a global network that knows no borders, colors or ethnicities,” he said. “So when an exchange bans Iranian users, it is basically downgrading its applications to that of fiat currencies.”

New alternatives emerge

Still, local Iranians seeking to buy and sell cryptocurrency are not without options. The restrictions are increasingly pushing Iranians toward truly decentralized exchanges that won’t discriminate based on nationality.

Programmer Ziya Sadr says two alternatives to Localbitcoins have already proven to be better and are attracting Iranian users. The first is Bisq, he said, an open-source decentralized peer-to-peer application that runs on Tor, and has recently integrated Farsi for Iranian users.

“Bisq doesn’t require you to do KYC and all deals run either privately or anonymously,” Sadr told CoinDesk in reference to know-your-customer identification protocols. “This makes it perfect for Iranian users who are always censored or blocked.”

He also referred to Hodl Hodl as another option, which is similar to Localbitcoins but has also recently added a Farsi interface for Iranian users.

“This seems to be a way for the founders of Hodl Hodl to welcome Iranian users to their website,” Sadr said.

Lastly, some Iranian users have also turned to the KeepChange peer-to-peer exchange, which in the wake of the LocalBitcoins ban sought to reassure possible users that it remains loyal to the bitcoin philosophy of preventing government interference and resisting censorship.

“Iranian users, as well as any other nationalities anywhere in the world, can use KeepChange for buying and selling bitcoin without worrying of any kind of censorship, sanctions, money seizures, etc.,” the exchange told an Iranian website on May 19.

Iran image via Shutterstock