Iran government asks miners to stop Bitcoin production

Key facts:
  • According to authorities, cryptocurrency mining has caused power outages in the country.

  • The president of Iran said that mining will be completely banned until September of this year.

Despite the fact that a few days ago the Government of Iran granted permission to operate 30 Bitcoin mining farms, now Iran’s first vice president Eshaq Jahangiri has asked all cryptocurrency miners operating legally in the country to stop mining altogether.

According to the authorities, the decision responds the impact that mining activity has generated on the country’s electricity consumption, and also that many unlicensed miners have illegally taken advantage of the electricity grid, causing major blackouts nationwide. Even the Minister of Cooperatives, Labour and Social Welfare, Mohammad Shariatmadari, said there was a two-hour blackout at his home.

As Crypto News reported in September last year, thanks to that Iran granted permits to mine bitcoin in the country, new farms and power plants joined this activity. Even the Thermal Power Plant Holding Company (TPPH), in charge of distributing and managing the development of the 129 public and private power plants in the country, auctioned electricity from the Ramin, Neka and Shahid Montazeri power plants.

Jahangiri said that due to blackouts, they seek to control electricity consumption, which will continue until early August:

We will make sure that there are no cuts in essential and important places. Licensed miners must also stop production altogether.

The current scenario has led the authorities to conducting raids to confiscate mining equipment and they have even imposed heavy economic penalties on those who are discovered mining even if they have a license. According to the authorities, bitcoin mining threatens energy supply for the rest of the year, added to the prolonged drought in the country and the increase in the demand for energy by the summer.

President Hassan Rouhani said in May that cryptocurrency mining would be banned in the country until September to conserve energy during the summer months.

The controversy surrounding Bitcoin mining in Iran

Iran turned to digital assets as an alternative to circumvent U.S. economic blockades affecting financial transactions and the oil sector. They have even authorized commercial banks to pay for imports with bitcoin.

The legalization of mining in Iran took place in 2019, as long as the miners who are in the territory are licensed and sell all your bitcoins to the Central Bank of Iran. The bitcoins purchased by the authorities are used exclusively as international currency in the country’s import market, which has suggested that the government intends to save the assets for the long term.

The measure also prohibits transactions with bitcoin and cryptocurrencies that are mined or mined outside the country, with which many users disagree. According to data from the University of Cambridge, in Iran, bitcoin mining increased from 1.74% to 3.8% in just seven months.

Chart of the approximate geographical distribution of Bitcoin global hashrate from September 2019 to April 2020.

The Government of Iran has pointed out that efforts to regulate bitcoin mining are intended to minimize capital flight in the face of the loss of value of the rial, the national currency.

In addition, the Tasnim News Agency, of that country, reported that the Economy Committee of the Iranian Parliament handed over a bill that seeks to convert the Central Bank of Iran, in the regulatory authority for local cryptocurrency exchanges, under the regulation of the Ministry of Industry, Mines and Trade.

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