Iran bans crypto mining after summer power cuts strike early | Business and Economy News
Tehran, Iran – Iran has banned all cryptocurrency mining for the next four months as widespread power outages stir public dissatisfaction across the country.
President Hassan Rouhani said on Wednesday that all crypto mining operations in Iran – including legal ones – must shut down until the end of the sixth Iranian calendar month on September 22.
“Now everybody has a few miners laying around and are producing Bitcoins,” he told a televised cabinet meeting with a chuckle.
Cryptocurrency mining is the process in which banks of powerful energy-hogging computers known as “rigs” race to verify transactions in exchange for new tokens. The practice can be highly lucrative. But in Iran and other countries, the impact on power grids and the carbon footprint of Bitcoin mining, in particular, has elicited a strong backlash.
This month, one of crypto’s most influential boosters, Tesla boss Elon Musk, triggered a crash in Bitcoin and other token prices after he tweeted that the electric vehicle maker would no longer accept Bitcoin for payment. The reason he gave for the U-turn was climate concerns.
Rouhani said legal crypto mining operations in Iran consume about 300MW of electricity, which is very insignificant. But illegal operations consume up to 2,000MW.
Thousands of illegal mining rigs have been confiscated in the past few years, according to officials. The government has recently called on its intelligence ministry to crack down on illegal miners while a prize of 200 million rials ($900) is also being considered for whistle-blowers who help identify illegal operations.
Provinces across the country, especially the capital Tehran, have been battling sporadic power outages that have frustrated many citizens. Social media are filled with images of how surgery rooms, businesses and homes have been impacted by unannounced power cuts that can strike several times a day.
The president said the main reason behind the outages – which have become routine each summer in Iran but arrived even earlier this year – is unusually low rainfall that has impacted hydroelectricity production.
But many observers say mismanagement of the country’s decrepit and under-resourced electricity grid is primarily to blame.
First Vice President Eshaq Jahangiri said on Monday that Iran’s power infrastructure is in dire need of investment and that the private sector must be empowered to help the cash-strapped government with funding.
The assertion that cryptocurrency mining is the main driver of power cuts has long been disputed.
Most recently, the head of the digital economy commission of the Iranian parliament, Mojtaba Tavangar, said last week that lawmakers’ probes show that cryptocurrency mining takes up about one percent of the country’s total power output.
“The reason behind the power outages is not cryptocurrency mining, it’s stopping funding and the old distribution and generation network,” he said.
Nevertheless, cryptocurrency mining farms have been shut down during the hot season for the past several years to help take a load off the strained grid.
Around 4.5 percent of all global Bitcoin mining takes place in Iran, yielding up to $1bn worth of revenue – money that can be used to lessen the impact of harsh United States sanctions, according to a recent report by analytics firm Elliptic.
While crypto mining is recognised as an industry in Iran and has defined electricity prices, no clear regulations govern the wider crypto space that has attracted millions of new investors in the past year.
The regulatory deficit has led to poor transparency. But observers say that massive volatility in the country’s stock market and relentlessly high inflation rates have led to a large number of Iranians sinking their savings into cryptocurrencies as a hedge against eroding purchasing power.
But low crypto literacy rates have proven fertile breeding ground for scammers, while crypto’s notorious volatility has seen many investors lose their shirts when bets turn against them.
Most recently, an Iranian crypto executive, Sina Estavi, who ran both a crypto exchange and a blockchain-based project, was arrested by Iranian authorities for “economic disruption”.
After Estavi was arrested, many who held money and crypto tokens in his exchange and project lost their capital, and have been trying to recover it through Iran’s cyber police.
Even as unofficial allegations against Estavi had been mounting for some time, he had built up a reputation online. For instance, he had purchased a non-fungible token (NFT) of Twitter CEO Jack Dorsey’s very first tweet for $2.9m.