Due to widespread power outages, which have stirred general dissatisfaction, Iran has banned all cryptocurrency mining for the next four months.
On Wednesdays, President Hassan Rouhani said that until the end of the sixth Iranian calendar month on September 22, all crypto mining operations, including the legal ones, should come to a standstill.
In a televised cabinet meeting, he said, “Now everybody has a few miners laying around and producing Bitcoins.” He continued that cryptocurrency mining happens when banks use their inefficient power computers known as “rigs” are employed when new coins in the exchange verify transactions. This is a highly lucrative practice. However, an intense backlash has been evoked as it affects the environment. Countries like Iran and others who mine bitcoin require high power, which affects the power grid and leaves a heavy carbon footprint.
This month, Tesla boss Elon Musk, one of the crypto influences, tweeted that Tesla electric cars will not accept Bitcoin as a method of payment. His reason was that he was concerned about the climate. His tweet triggered the massive crypto crash.
In Iran, energy consumption for legal crypto mining operations is very insignificant, about 300MW. But more than 2,000MW energy is consumed by illegal operations, Rouhani said.
According to officials, thousands of illegal mining rigs have been seized in the past few years. In addition, the government ordered the intelligence ministry to search and apprehend illegal miners. The government has also declared a prize of 200 million rials, roughly $900, to the whistle-blower who helps to identify illegal operations.
Provinces across the country are battling irregular power outages, which has frustrated many citizens. This situation is especially true in the capital Tehran.
The unannounced power cuts that are frequent throughout the day have had social media streamed with images of how businesses, surgery rooms, and homes get impacted.
The President said that summer had arrived early, which has become a routine in Iran, as deficient rainfall that has impacted hydroelectric production is the main reason behind frequent outages.
According to some observers, the mismanagement of the country’s weak and under-resourced electricity grids are the main culprits.
On Monday, Iran’s first Vice President Eshaq Jahangiri said that the government must empower private sectors fund and help the government, which is low on cash, to invest in Iran’s power infrastructure.
Is crypto being made into a scapegoat?
The statement that the power cuts are due to cryptocurrency mining has long been disputed.
Mojtaba Tavangar, the Iranian parliament’s head of the digital economy commission, recently said that cryptocurrency mining takes roughly about one percent of the country’s total power output.
He said the outages are not due to crypto mining but the old power distribution and power generation network.
However, during the hot seasons for several years, the cryptocurrency mining farms have been shut to help take a load off the power grid.
A recent report from analytic firm Elliptic, Iran, produces roughly 4.5 percent of the total Bitcoin mining globally. This helps reduce the harsh sanctions imposed by the United States.
Even though crypto mining is recognized by Iran as an industry and has defined electricity prices, there are no clear regulations that govern the more expansive crypto space while attracting millions of new investors within the past year.
Poor transparency is the result of a regulatory deficit. Massive volatility in the country and perpetual high inflation have led many Iranians to immerse their savings into crypto with a hope to hedge against diminishing purchasing power.
Many Iranians have been victims of scams due to the low crypto literacy rate. It has proven to be a fertile ground for scammers. While high volatility had left some without sleep when the odds were stacked against them.
Sina Estavi, an Iranian crypto executive who ran both a crypto exchange and a blockchain-based project, was recently arrested on charges of “economic disruption” by the Iranian authorities.
After the arrest of Estavi, many invested money and cryptocurrency in his exchange, and his blockchain-based project lost its capital. However, they tried to recover through the Iranian Cyber Police. Even though there were unofficial allegations against Estavi, he had built up a reputation online. In addition, he had purchased a non-fungible token (NFT) of Jack Dorsey, CEO of Twitter, when Jack tweeted his very first tweet for $2.9 million.