Iran has banned cryptocurrency mining for four months as the energy intensive industry has triggered electricity blackouts across the country.
In recent weeks, businesses and households across Iran have experienced blackouts for as much as six hours a day. Rolling blackouts cost Iranian chess players their match in an online Asian championship.
“Everyone is finding a corner to mine bitcoins and cryptocurrencies,” President Hassan Rouhani said on Wednesday. “Whoever does this from today is doing an illegal job even those who were allowed [to mine bitcoins] are no longer allowed until we leave behind this problem [of power cuts].”
Iran’s economy has been hit hard by Donald Trump’s decision to unilaterally pull the US out of the nuclear agreement Tehran signed with world powers and impose crippling sanctions. Demand for digital currencies in Iran has risen in recent months as people try to hedge their savings against an annual inflation rate of 46.9 per cent, a plunging stock market and stagnant house prices.
Rouhani on Wednesday ordered the ministries of industries, telecommunication, energy and interior affairs to clamp down on cryptocurrencies. He said electricity consumption had increased by 20 per cent over the past year, though he did not clarify how much of this was caused by cryptocurrencies. This is the second time Iran has sought to crack down on digital currencies.
Cryptocurrency mining has taken off in Iran in part because of the availability of highly subsidised electricity for what is a power-intensive industry. Imports can, in theory, be paid for with bitcoins. But US sanctions bar any banking transactions with Iran and blockchain technology records transaction details, making it difficult for Iranian traders to use cryptocurrency to evade sanctions.
“We have not been able to establish connections to reliable digital currency exchangers because of sanctions and our little experience,” said one businessman close to the regime.
In 2018, the US Treasury department identified two digital currency addresses and associated them with two Iran-based individuals who allegedly helped exchange bitcoin ransom payments into Iranian rials. The Treasury vowed to “aggressively pursue Iran and other rogue regimes attempting to exploit digital currencies”.
Despite this, overseas investors, including China, have invested in cryptocurrency mining in Iran. A Chinese-run operation in Rafsanjan, southern Iran, is estimated to be the biggest in the country.
Polish, Indian and Turkish companies have also received permission to mine bitcoin in Iran, Majid-Reza Hariri, head of Iran-China Chamber of Commerce, told local news agencies on Tuesday.
Analysts are divided over whether bitcoin mining is really to blame for the electricity cuts. Bitcoin mining, including illegal operations, count for less than 10 per cent of the country’s electricity production. They also blame this year’s severe drought for electricity shortages.
It is also not clear how easy it will be to enforce the restrictions. Last week, the energy ministry tried to shut down one operation but was met with gunfire.
Meanwhile, demand remains high. “My friend sold her apartment last year and bought bitcoins which made her money multiply over one year. I think I should take the risk, too,” said Anousheh, a 35-year-old employee of a publishing company.