Iran could allow bitcoin mining again, but it looks like miners will have to start paying full price for their energy.
State-financed news source PressTV this week reported that the governor of the Central Bank of Iran (CBI), Abdol Nasser Hemmati, announced that the Iranian government is moving to authorize bitcoin mining. Following turbulent weeks in which Iranian mining operations had their power cut off and in some instances even their hardware seized, this is another sign that mining may be allowed again — though it was never actually officially banned.
Indeed, while apparently positive news for Iranian bitcoin miners, recent comments from Iranian officials — as reported by Iranian (usually government-financed) press — in some cases appear uncoordinated, with different government bodies making contradictory statements and taking inconsistent action.
Bitcoin Mining in Iran
Electricity, mostly produced from natural gas, is relatively cheap in Iran. Households pay the equivalent of around $0.03 to $0.05 per kilowatt hour (kWh). (For comparison, in most western countries 1 kWh costs at least $0.10, and often significantly more than $0.20.) On top of that, industrial use of energy is annually subsidized for $1 billion by the Iranian government. And since it is priced in the Iranian rial, which fell sharply against USD, one government-subsidized kWh today costs less than $0.01.
Bitcoin and cryptocurrency mining is an energy-intensive process, and usually most profitable where energy prices are the lowest. Unsurprisingly, therefore, a growing number of bitcoin and cryptocurrency miners have been finding a new home in Iran over the past year, occupying locations with subsidized energy, such as abandoned factories, agricultural sites, government offices and mosques. This includes Chinese miners, who are increasingly shunned from mining in their own country, as well as miners from Europe and Iran itself.
By late June, Iranian news reports claimed that bitcoin mining had become so popular that it had a noticeable impact on the nation’s energy grid. Between May 22 and June 21, 2019, national energy consumption had increased by 7 percent compared to similar periods in previous years, according to Ministry of Energy spokesman Mostafa Rajabi Mashhadi. Speaking with Iranian press agency IRNA, Mashhadi stated that “a bulk of that unusual increase is because of the activity of bitcoin miners.”
Not everyone in Iran is happy about the up-and-coming mining industry, however. Deputy Energy Minister Homayoun Haeri had, in early June, told IRNA that cryptocurrency miners should not be eligible for the subsidized energy and should instead pay export prices for their power, according to English language Iranian news source Financial Tribune. At about $0.07 to $0.10 per kWh, this would be much more expensive than the subsidized industry rate.
More recently, according to a separate report by PressTV, Mashhadi even said the ministry considered the industrial mining operations harmful and had started tracking down some of them. The spokesman went so far as to suggest that prosecutions would follow.
“The high consumption by cryptocurrency miners has led to some electricity supply instability and even damage to other electricity users,” Mashhadi said. “If the trend continues, those subscribers who are found to be making unauthorized electricity use will face legal action.”
While there are no confirmed cases where the government took legal action, officials indeed did move to stop bitcoin miners: Several Iranian mining operations had their power cut off. Additionally, Reuters reported that, in at least one facility, Iranian authorities confiscated the specialized mining hardware required to mine bitcoin. The days of large-scale bitcoin mining in Iran seemed over.
The Iranian government appears somewhat divided on the topic, however, with some state agencies seeming to favor a more welcoming policy toward the miners.
PressTV itself made sure to note that Bitcoin could help Iran in the geopolitical sphere, writing that “an awful lot of the U.S. power comes from the dollar being used as the standard unit of international finance and transactions. The use of bitcoin is eating at that advantage and effectively disempowering the United States.”
“For countries like Iran […] virtual and digital currencies provide a back-channel to bypass U.S. sanctions.”
Several departments of the Iranian government also seem open to Bitcoin. Saeed Zarandi, the deputy minister for industry, mining and trade, took a much more balanced approach than the Ministry of Energy, stating that several government committees were examining the issue.
“With regard to bitcoin, we have to investigate its threats and opportunities and ultimately make an appropriate decision by taking these issues into account,” Zarandi told Iranian news agency Tasnim, PressTV reported.
According to Zarandi, a number of ministries, as well as the central bank, have yet to make their decision on the legality of cryptocurrency mining and what status it should have for energy consumption.
“If we decide to view this as a productive work, we need to define its framework and come up with a supervisory mechanism,” he said, “but the important thing is that this activity has not been defined yet a productive work.”
How It Could Work
Mohammad Javad Azari Jahromi, Iran’s minister for communication and information technology, went a step further. He told PressTV that he believes the government should authorize cryptocurrency mining. Specifically, Jahromi argued that miners could make use of Iranian electricity in off-peak hours, when it is unused by the local population and industry. This would create wealth in the country, he argued; using the abundant energy for cryptocurrency mining would be more profitable than exporting it.
And finally, just a few days ago, the governor of the Iranian central bank announced that the government has approved plans which would allow bitcoin mining. However, according to Hemmati, this would come under two conditions: One, “Mining of the international digital currencies should be done based on the price of electricity for export,” and two, “These mined currencies should be fed back to the national economic cycle.”
Of course, at export energy prices, it’s less obvious that bitcoin mining will be a profitable endeavor in Iran — but at least it would be allowed.