Iran decided today to issue a ban on bitcoin and cryptocurrency mining for four months.
This is reported by Reuters, which cites words spoken by President Hassan Rouhani on TV during a cabinet meeting:
“The ban on the mining of cryptocurrencies is effective immediately until September 22 … Some 85% of the current mining in Iran is unlicensed”.
The problem is that despite the high availability of oil, Iran is experiencing numerous blackouts, which are widely criticized by Iranians. With presidential elections due to be held in the country next month, Rouhani’s government has decided to blame cryptocurrency mining for these episodes, as well as the drought and the summer increase in demand for electricity.
For this reason, the current president has decided to suspend bitcoin and cryptocurrency mining for four months.
In total, about 4.5% of all bitcoin hashrate appears to be located in Iran, allowing the country to earn hundreds of millions of dollars through mining. In addition, mined cryptocurrencies are forcibly acquired by the central bank, which then uses them to circumvent international sanctions.
The consequences of Iran’s ban on Bitcoin mining
Although more than 1,000 mining farms have been licensed in the country, according to the president’s statement, there are in fact many more operating without authorization, which presumably do not sell mined tokens to the central bank.
However, the ban announced today could encourage the use of unauthorized mining. It is said that there are people in Iran who hide cryptocurrency mining machines in their homes, or even in mosques, and that the state has enlisted spies to track down miners who are operating illegally.
Electricity produced from oil extracted in the country is very cheap, so cryptocurrency mining in Iran is a very profitable business. However, it consumes valuable resources to produce energy for e.g. public and private lighting, and produces pollution as non renewable energy sources are used.
It is likely that Iran’s underlying problem is that the cost of electricity is so low that it is unable to regulate its consumption, making crypto mining unprofitable.
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