The Iranian government recently approved digital coin mining. The announcement, made in July 2019 by the country’s Economic Commission, prompted authorities to find ways to control crypto mining within its current legal framework. Thanks to the country’s low electricity costs, mining had been booming even before it was officially legalized.
Cost of mining electricity
A study conducted by Crescent Electric Supply Company found the cost of mining 1 Bitcoin to be as low as $3,217. However, energy spokesman Mostafa Rajabi reported a 7% increase in energy consumption last month as a result of the numerous mining operations around the Islamic republic.
Homayun Haeri, deputy head of electricity and energy at the Ministry of Energy, said the ministers would discuss an initiative to impose an electricity fee on these farms. Haeri has recently opposed government subsidies, saying that mining companies should pay their electricity bills at real prices. Given that Iranian authorities use about $1 billion a year on energy subsidies.
According to Abdolnaser Hemmati, governor of the Central Bank of Iran (CBI), the accepted mining mechanism will face further scrutiny at a cabinet meeting. Hemmati argued that the country’s miners should build the local economy instead of releasing “mined Bitcoins” abroad. Furthermore, he argued that mining should be dependent on electricity export prices. Currently, electricity exports amount to $0.7 to $0.10 per kW⋅h. So-called Bitcoin miners, however, pay only $0.05 per watt, which is the fee for agricultural and industrial enterprises.
In a previous meeting, the chairman of Iran’s economic committee, Elias Hazrati, said that cryptocurrency should be recognized as an official sector so that the country can receive tax and customs revenues. The committee has already developed a tariff schedule that equates crypto mining with the cost of exporting electricity. Although Vice President of Energy Homayun Haeri did not disclose the exact figures, he said that export prices depend on various factors, for example, the cost of Persian Gulf fuel.
Mining facilities closed
In June 2019, Iranian authorities shut down mining operations as electricity consumption soared. For a while, the government did not state its official position on currency mining. Not long ago, Energy Ministry spokesman Mostafa Rajabi attributed the power instability consumers face to crypto mining.
The statement followed the closure of two mining facilities in Yazd. In abandoned factories, the farms had about 1,000 mining machines. Rajabi acknowledged that the energy to mine a single Bitcoin could power 24 households for a year.
Some ontology units operated inside schools where electricity was free. Not only that, Kamil Brejcha, a Cryptocurrency miner, confessed to setting up mining rigs next to greenhouses to take advantage of the cheap electricity he received for his operation.
Foreign Investors
Due to high electricity costs and strict policies in China, many Chinese miners are moving to Iran as well as other destinations such as Canada, the US, Thailand, Iceland, Cambodia, Southeast Asia, and Vietnam.
Nima Dehqan, an analyst at blockchain startup Areatak, said his company has been in talks with foreign investors about mining in Iran. According to Dehqan, these investors have withdrawn from countries such as Ukraine, France, Spain and Armenia.
The deteriorating economy combined with the unstable Iranian currency has pushed citizens to adopt digital currencies. Therefore, crypto-mining not only keeps money within the country, but also creates foreign exchange.
Use of encryption
Although Iran has given the green light for crypto mining, it is unclear whether the authorities will change their previous stance on cryptocurrencies as a means of local payments. Just recently, the Central Bank of Iran issued a draft framework to explore the legality of crypto and expressed its satisfaction with the reactions from the public.
While some are happy with the plan, the majority of the local crypto community does not approve of the details. This is because they feel that the framework threatens the freedom of individuals and businesses in the digital marketplace when implemented in its current form. One of the activities the plan aims to ban is the use of digital currencies for local payments.
Similarly, it allows crypto exchanges to get licenses, thus creating an avenue for the government to charge rent. Another reason why local communities are opposed to the proposal is the excessive use of the word “prohibited”, which presents the risk of criminal prosecution. In an attempt to correct these clauses, community members compiled their suggestions into a document and sent it to the CBI.
The 13-page document, which was reviewed by about three dozen contributors, has a total of 51 issues. So far, only two Iranian citizens have been placed on OFAC’s sanctions list. In 2018, Ali Khorashadizadeh, along with Mohammad Ghorbaniyan, faced OFAC sanctions over allegations related to payments for the ransomware .
The two were accused of representing two cybercriminals who had targeted more than 200 entities in a hacking that lasted nearly three years. Although Ghorbaniyan is in possession of the payments, he denies knowing the source of these funds.
