Mohammad Javad Azari Jahromi, the Iranian minister for information and communications technology, called the nation a “heaven for miners,” according to AP News.
He said that Iranians have turned to crypto mining as a countermeasure against looming hyperinflation and economic collapse following economic sanctions from Washington, D.C. However, he also noted that, while Bitcoin mining isn’t illegal in the country, the government wants to restrict the importation of mining equipment, pending sweeping regulations being formulated.
“The business of ‘mining’ is not forbidden in law, but the government and the Central Bank has ordered the Customs Bureau to ban the import of [mining machines] until new regulations are introduced,” Jahromi explained.
Bitcoin Mining and Energy Consumption in Iran
Bitcoin mining is an energy-intensive activity. Miners make money when the cost to earn a block reward is lower than the cost of operating the machines that make it possible. For most miners, power takes up a huge chunk of overhead costs. China used to be the haven for miners, but mounting regulations led to an exodus of miners who sought redemption in Iran. The Gulf state offers cheap energy that is attractive to overseas miners.
Iranians pay as low as $0.06 per kilowatt-hour (kWh) for power, which is a far cry from the $0.20 per kWh paid in most developed countries. Besides the cheap electricity bill for households, industries and religious centers like mosques enjoy subsidized energy.
Some government officials, like Ministry of Energy Spokesman Mostafa Rajabi Mashhadi, believe the booming mining industry is to blame for the recent spike in the electricity consumed in the country. The country’s energy grid had experienced a 7 percent increase from May 22 to June 21, 2019.
Mashhadi’s statement, if anything, shows that the government has so far backpedaled from last year’s acceptance of the mining industry. At the time, Secretary of Iran’s Supreme Cyberspace Council Abolhassan Firoozabadi had described crypto mining as an acceptable industry in the country.
“The high consumption by cryptocurrency miners has led to some electricity supply instability and even damage to other electricity users,” Mashhadi explained. “If the trend continues, those subscribers who are found to be making unauthorized electricity use will face legal action.”
While the government remains divided on how best to manage the industry, the recent crackdown on miners — including the seizure of specialized mining gear — won’t deter bitcoin miners. This is evident in the number of miners who have set up shop in mosques in a bid to dodge energy costs. Having been cut off from SWIFT and other global banking systems, Iran can’t afford to be cut off from crypto.
Jimmy has been following the development of blockchain for several years, and he is optimistic about its potential to democratize the financial system.