Only this time, government officials say bitcoin mining at so-called cryptocurrency farms – an energy-intensive business using large collections of computers to check digital coin transactions – is partly to blame.
On Thursday, Iran’s state-owned electricity company Tanavir announced it had closed a large cyber-currency-run cyber-currency center in the southeastern province of Kerman because of its high energy consumption. It is reported that the company has received a license to work on a process that the government introduced in 201
In addition to citing a figure for legal operations, Iranian officials specifically highlighted illegal cryptocurrency miners as power outages causing disruptions, said Mostafa Rajabi Mashhad, a spokesman for the Iranian energy ministry’s electricity industry, IRNA said. On Wednesday, Ali Waezi, a spokesman for Iranian President Hassan Rouhani, said the government would investigate cases of unlicensed cryptocurrency farms.
But Iranians in the bitcoin industry have dismissed the government’s accusations, saying the industry has been blamed for a broader problem.
“Miners have nothing to do with eclipses,” Zia Sadr, a cryptocurrency researcher in Tehran, told The Post. “Digging is a very small percentage of Iran’s total electricity capacity.”
He added, “It is a known fact that the poor management and very terrible condition of the electricity grid in Iran and the outdated equipment of power plants in Iran cannot support the grid.”
The government itself cited cheap electricity rates provided by government subsidies as another major reason for dropping out. A member of the board of the Iranian Blockchain Association told IRNA that the electricity used by miners for cyber currency in Iran is approximately equal to the electricity lost from the grid during the distribution.
The confrontation underscores the rocky path for cryptocurrencies, which could theoretically thrive in an economically troubled country like Iran, where some have hailed the alternative banking system as a possible way to circumvent US sanctions.
Meanwhile, electricity problems continue. In recent days, overvoltage power plants have stopped as demand for natural gas for home heating has risen. Others have reportedly turned to low-quality fuel to maintain a tense power grid. Pollution levels in the capital Tehran have reached “very dangerous” levels.
When the lights work, Iran’s combination of cheap electricity and high inflation has made it an ideal destination for the energy-intensive process of creating or extracting digital currencies such as bitcoin, crypto expert Ali Bakverdi said.
Decentralized cryptocurrencies rely on powerful computers to verify that transactions are legitimate by solving complex mathematical problems. Digging for digital coins is a potentially lucrative business that has begun in recent years in Iran, as companies in countries such as China and Russia have partnered with Iranian entrepreneurs to create so-called bitcoin farms from specialized computers.
“Any country that has cheap electricity and a huge area would be the ideal place to mine bitcoins,” said Bakerdi, who is from Iran and now lives in Seoul, in an interview with The Post. “It wouldn’t be profitable in Korea because I would have to spend a lot of money on electricity.”
Bitcoin mining had already begun illegally in Iran when the government noticed it a few years ago. This initially extended to miners who used computers and other equipment smuggled in from places like China, Sadr said.
Then in 2019, he passed legislation to regulate the thriving industry under the table: Miners of bitcoin and other cryptocurrencies had to apply for a license to operate and import computers and related equipment. The registration enabled the government to provide farms with electricity at a higher rate than the general public.
Sadr said the new legislation disadvantages those already established in the industry, as there is no way to legalize operations involving illegal equipment.
During these recent eclipses, the government has licensed 24 cryptocurrency mining centers with more than 310 megawatts, Mashhadi told IRNA.
He said officials had also identified 1,620 unauthorized centers with a capacity of nearly 250 megawatts. According to them, the government has deployed more than 500 of them, according to Mashhadi. Iranians have reportedly set up shops to dig for bitcoins in everything from mosques to real farms to take advantage of the lower cost of electricity. The government has offered a reward of 10 million tons ($ 430) for information on the locations of illegal operations.
However, official levels of energy consumption by both legal and illegal bitcoin farms remain only a fraction of the estimated 40,000 megawatts, according to the energy ministry, consumed in Iran during peak hours in recent days.
The Iranian government has tried to expand control over the industry in other ways. Lawmakers recently passed legislation restricting cryptocurrencies from being used to finance imports and exports with Iran’s central bank as an intermediary. However, the law does not apply in practice because there is no system for doing so, Sadr said. The government has announced plans to develop its own cryptocurrency, although no significant progress has been made.
Caught in a free fall, Iran’s local currency hit another low in October. The government, for its part, is facing growing financial pressure: last November, it issued a cut in fuel subsidies late at night, sparking mass protests across the country, which authorities forcibly suppressed.
Bakverdi said the appeal of cryptocurrencies remains strong for many in a politically and economically militant country like Iran. Digital commerce “enables people,” he said. “It helps people do things financially on a larger scale without relying on states or governments.”
But both Bakverdi and Sadr have said that cryptocurrencies alone are not appropriate for US economic sanctions, which under the Trump administration have become the toughest ever, cutting Iran off from all kinds of global trade and international banking systems. Since 2018, the US Treasury Department has sanctioned several Iranians for violating sanctions using cryptocurrencies.
“Bitcoin is not the answer [U.S. sanctions]”, Said Sadr. “Bitcoin is just a tool. The problem with sanctions is a much bigger problem. This is a much bigger block for people. “
President-elect Joe Biden has vowed to lift many of those economic sanctions and return to the Iranian nuclear deal, which Trump withdrew in 2018, if he and his Tehran counterparts can agree on terms.
However, Sadr said it would be a long time before a measurable level of international trade with Iran could take place with the help of bitcoins, as the business is currently either not interested or not equipped to work with digital coins.
“If there is no market for it, no participants for people who want to import and export with people in Iran … then bitcoin cannot help with that,” he said. “Let’s say they know you’re Iranian, that your business is from Iran, then they won’t work with you.”