Iran vs Bitcoin mining: The love-hate relationship

Iran has a very complicated relationship with bitcoin miners, as miners are seen as a source of income and blamed for power outages

Iran is aiming to develop a new source of income for the state through crypto mining. To satisfy this, the state are coming down hard on crypto miners.

The reason for pushing for this new source of income is due to the high number of international sanctions they have been hit by, which resulted in a loss of revenue from oil exports.

Therefore, Iran has decided to look at crypto as a source of cash revenue. The state has cracked down on local miners in a bid to regulate the revenue stream, however, Iran are also opening new opportunities to push for foreign mining firms to invest and move to Iran.

Iran is no new player to the Bitcoin and cryptocurrency mining sector. According to a research paper conducted by the University of Cambridge, Iran was responsible for approximately 4% of the global Bitcoin hashpower during the year of 2020.

This has resulted in Iran experiencing a huge rise in pollution since bitcoin mining requires a significant amount of energy output.

Therefore, with many governments around the globe pushing for renewable energy for a cleaner environment, bitcoin mining could be detrimental to these plans.

However, there are conflicting ideas on this scenario as experts have countered this suggestion. They stated that bitcoin mining is not the reason behind Iran’s electricity outages and the cryptocurrency is being used as an easy victim. The telecommunications ministry estimated that Bitcoin accounts for less than 2% of Iran’s total energy production.

Iran are still looking to take advantage of bitcoin mining by instructing miners to register with the Ministry of Industry, Mines and Trade. This registration resulted in the miners paying higher electricity tax than retail or industrial users last year.

Revenue vs Environment

The relationship between Iran and miners is definitely a love-hate relationship, as although Iran see them as a potential source of income, bitcoin miners are also being blamed for the high number of power cuts in the country.

During January 2021 alone, Iranian authorities reportedly shut down 1,620 unregistered mining farms and 45,000 mining devices were confiscated.

With such a complicated relationship with miners and the sanctions imposed on Iran, it may be difficult to see a high number of foreign investors move to or invest in Iran.

One of the countries being blamed for the sudden blackouts is China. China is one of the few countries that are allowed to invest and operate in Iran as they are not affected by the imposed sanctions. A number of officials are blaming Chinese bitcoin miners for the recurring blackouts as well as the surge in pollution.

The Iran-China Investment Development group are a company that have a mining farm operating under their name and have rejected these type of allegations such as being responsible for pollution and power outages, shifting the blame on the inefficiency of the Iranian electricity industry.

The farm employs 54,000 miners and is the largest legal mining farm in the country, reportedly utilising 175MW of electricity.

Iran’s Bitcoin mining history

During a cabinet session administered by Hassan Rouhani,  on the 27th July, 2019, the Iranian government gave the greenlight to bitcoin mining and considered it as an industrial activity.

The government believed that the cryptocurrency industry deserved to be recognised as an official industry, which allowed the country to take advantage of its tax and custom revenues.

The decision to approve crypto mining was seen as one of the first steps towards legalising crypotcurrencies in Iran and was also considered to be a solution around the US-imposed economic sanctions.

Source: Coindesk