Iranian government targets cryptominers amid bitcoin rally

Iranian government targets cryptominers amid bitcoin rally
Iranian government is seizing crypto miners as prices hit $50,000 a Bitcoin. / bne IntelliNews
By bne correspondent in Tehran February 13, 2024

Iran Power Generation, Transmission, and Distribution Company (Tavanir) have launched an initiative to tackle unauthorised crypto mining amid the surge in cryptocurrency values and foreign exchange rates, as reported by Barghnews on February 12.

News of the push to seize cryptominers comes amid large gains in bitcoin and other cryptocurrencies in recent weeks, with BTC hitting $50,000 on February 12 with estimates it could rally above $120,000 by April in global markets. 

Hamid Pirpirian, Tavanir's deputy director, has instructed regional offices to establish working groups to address the challenges posed by cryptomining, despite the government's relaxed attitude to cryptocurrency exchanges as a form of US sanctions evasion.

Cryptocurrency mining became legal in Iran in 2019 after significant debate requiring miners to obtain a license from the Ministry of Industries and use efficient hardware approved by the Iran Standard Organisation. The government provides authorised farms with power at export prices after miners caused blackouts across Tehran and other cities due to historically low energy prices.

Authorities picking up pace on seizing miners 

The announcement of the new crackdown comes amid increasing reports from several cities across Iran that new crypto mines are being discovered regularly. On February 13, Qazvin Police, a city west of Tehran, announced it had seized 9 mining machines from a residential residence and bitcoins to the value of IRR3bn ($54,450) in one location, Young Journalists Club reported. 

On January 22, at least 22 crypto miners were taken by police in Tabriz in the northwest of the country, following reports from the local power company that excessive use of electricity indicated a potential unregistered crypto mine happening in the country, East Azerbaijan's Broadcasting News Agency reported. 

Cryptomining soon gained traction in the Islamic Republic, particularly among those with access to subsidised or free electricity, like mosques, old chicken farms, schools, and even state buildings such as the basement of the Tehran Stock Exchange. After subsequent scandals involving religious sites and school basements, authorities began to increase the monitoring of power consumption. 

Following large-scale blackouts in Tehran and other cities in 2018, crypto miners were blamed, prompting a nationwide plan by the utility to identify illegal farms with swift action taken, including disconnecting entire buildings overnight if power consumption indicated mining. This initiative resulted in the seizure of thousands of mining hardware, primarily from residential properties, by authorities and the arrest of those mining.  Detection methods now include studying subscribers' consumption trends, rewarding whistleblowers, and patrolling suspicious locations.

Data on cryptomining in Iran

According to the latest data, 265,433 mining hardware units have been seized from 9,261 illegal cryptomining farms over the past three years. In addition to losing their devices, miners must compensate for any damage to the national grid caused by their illegal activities.

Tavanir anticipates additional strain on the power network whenever Bitcoin gains or foreign exchange rates experience growth in recent years. Despite these measures, illegal miners are estimated to consume between 1,200 MW to 15,000 MW of subsidised electricity.

The total number of authorised farms is approximately 153, and these miners are subject to restrictions, including a prohibition on using power during peak consumption periods. However, policymakers have allowed them to establish their own renewable power plants. Industrial cities like Tehran, Tabriz, Isfahan, and Ahvaz account for the largest share of confiscated devices. However, some experts believe that Tavanir is attempting to divert public attention from its own shortcomings by blaming cryptominers.

They argue that cryptominers collectively consume only a small portion of the country's nominal power capacity, and the real causes behind the blackouts lie in the failure to renovate the country's power generation plants and the monopolised mechanism of power generation in Iran.

Iran is no stranger to crypto developments, having been focused on using the anonymity of financial transfers to its advantage in the face of crushing international sanctions. As part of this move to seize on the uses of crypto in January 2022, the Central Bank of Iran (CBI) said it planned to launch  CBDC and use crypto to settle international settlements. As part of that scheme, the CBI and the ministry have agreed to link the central bank’s platform with the ministry’s comprehensive trading system (CTS) to facilitate trading.

Iran mulled launching an “e-toman” for the past couple of years to work around sanctions and break free of US restrictions on payment controls, including SWIFT and interbank transfers. However, technical and political concerns have slowed down the roll-out of the cryptocurrency, currently designated the Central Bank Digital Coin (CBDC).