Iran bans crypto mining activities

The Middle Eastern country has become one of the leading Bitcoin mining countries in the world. Iran houses some of the leading crypto mining farms, generating millions of dollars in revenue to the country.

However, the Iranian government has now banned crypto mining activities until September. President Hassan Rouhani announced this earlier today, revealing that cryptocurrency mining activities will resume by September 22. The president gave this order following a series of blackouts across major cities in the country.

Iran is one of the countries to legalize cryptocurrency mining. The country has so 50 licensed mining centers spread across 14 of its 31 provinces. According to grid operator Tavanir, the cryptocurrency mining centers consume roughly 209 megawatts of electricity. “The ban on the mining of cryptocurrencies is effective immediately until September 22 ... Some 85% of the current mining in Iran is unlicensed,” Rouhani said

Crypto mining putting a strain on the Iranian power sector

President Rouhani’s government has been criticized due to the series of power outages in major cities across the country. The Iranian government has blamed the power outages on cryptocurrency mining, drought and surging electricity demand in summer.

The country’s power sector and the general economy have been hit hard since 2018 when President Donald Trump exited Tehran’s 2015 nuclear deal. Trump also imposed economic sanctions on the country, making it tough to conduct international businesses. The condition could change soon as President Joe Biden and other world leaders have resumed talks with Iran to revive the deal.

The government said it is cracking down on 85% of mining operations that remain unlicensed. Iran has enlisted spies to locate miners who use computers at homes and mosques to mine Bitcoin and other cryptocurrencies secretly.

Iran is a hub for cryptocurrency mining activities

Iran has become one of the leading cryptocurrency mining countries in the world. The country accepted Bitcoin mining in recent years, attracted crypto miners due to cheap power. A new study from Elliptic revealed that Iran is responsible for 4.5% of all Bitcoin mining in the world. Meanwhile, the University of Cambridge estimates it to be around 3.8%, putting in sixth place behind China, the US, Russia, Kazakhstan and Malaysia.

Iran is already making money from cryptocurrency mining. The Elliptic study revealed that the country could generate $1 billion annually from cryptocurrency mining activities. “Iran has recognized that Bitcoin mining represents an attractive opportunity for a sanctions-hit economy suffering from a shortage of hard cash, but with a surplus of oil and natural gas,” Elliptic said.

However, cryptocurrency miners in Iran are obligated to sell their digital currencies to the Central Bank of Iran. The apex bank has been using Bitcoin and other cryptocurrencies to bypass the economic sanctions imposed by the United States. They use the cryptocurrencies to import goods into the country. The central bank expanded the scope last month, authorizing forex shops and banks to use cryptocurrencies for importation purposes.

Although Iran is one of the leading cryptocurrency miners globally, much of the activity is internalized. In addition to ordering crypto miners to sell to the central bank, the government also banned the trading of foreign-mined cryptocurrencies. According to the Central Bank of Iran, the move is to stop capital flight via cryptocurrencies. The local fiat currencies have been affected by the economic sanction, and the apex bank believes stopping capital flights could help preserve the currency value.

Cryptocurrency mining energy usage is now a concern

Iran banning cryptocurrency mining activities comes a few days after Chinese Vice Premier Liu He and the State Council suggested that the government could crackdown on cryptocurrency mining and trading activities. China is the largest crypto mining country globally, accounting for 65% of the total Bitcoin mining capacity. China is making the move to protect the financial system.

Earlier this month, electric car manufacturer Tesla said it has stopped accepting Bitcoin due to its intense energy usage and the subsequent effect on the environment. Some companies in the crypto space are now searching for ways to use renewable energy to mine Bitcoin and a host of other cryptocurrencies.