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Iran has banned cryptocurrency mining for four months as the energy-intensive industry has cast a shadow over electricity across the country.
In recent weeks, companies and homes across Iran have had blackouts for six hours a day. Permanent blackouts cost Iranian chess players the match in the Asian online tournament.
“Everyone finds a corner to extract bitcoins and cryptocurrencies,” President Hassan Rouhani said Wednesday. “What’s going on from today is doing illegal work even for those who are allowed [to mine bitcoins] they are not allowed until this problem is left behind [of power cuts]”.
The Iranian economy has hit hard on Donald Trump’s decision, on the one hand, to pull the U.S. out of a nuclear deal signed by Tehran with world powers and impose crippling sanctions. Iran’s demand for digital currencies has risen in recent months as people are trying to cover their savings against a 46.9 percent annual inflation rate, a stock market crash and stagnant house prices.
Rouhani on Wednesday ordered ministries of industry, telecommunications, energy and home affairs to deal with cryptocurrencies. He said electricity consumption had increased by 20% in the last year, although he did not clarify the amount affected by cryptocurrency. This is the second time that Iran wants to oppose digital currency.
Cryptocurrency mining has begun in Iran in part because highly subsidized electricity is available for an energy-intensive industry. Imports can, in theory, be paid for with bitcoin. U.S. sanctions prevent any bank transactions with Iran, and blockchain technology records transaction details, making it difficult for Iranian traders to avoid cryptocurrency sanctions.
“We have not been able to establish a connection with reliable digital currency exchangers due to penalties and our limited experience,” said a businessman close to the regime.
In 2018, the U.S. Treasury Department identified two digital currency addresses and linked them to two people based in Iran who allegedly helped exchange bitcoin bailout payments in Iranian rials. The Treasury promised to “follow Iran and other malicious regimes that try to exploit digital currencies”.
However, foreign investors, including China, have invested in cryptocurrency mining in Iran. An operation in Rafsanjan, southern Iran, is estimated to be the largest in the country.
Polish, Indian and Turkish companies have also been allowed to take out bitcoin in Iran, Iran-China Chamber of Commerce chief Majid-Reza Hariri told local news agencies on Tuesday.
Analysts are divided over whether bitcoin mining is to blame for power cuts. Bitcoin mining, including illegal operations, accounts for less than 10% of the country’s electricity production. They also blame this year’s severe drought on electricity shortages.
It is also unclear how easy it will be to enforce the restrictions. Last week, the energy ministry tried to close an operation, but was met with a shooting.
In the meantime, the demand remains high. “My friend sold his apartment last year and bought bitcoins, which multiplied the money in a year. I think I should have taken the risk as well,” said a 35-year-old employee of an Anousheh publishing house.
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