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The Bitcoin Bite: Iran Says Power Grid Hit By Cryptocurrency-Mining Surge


Iran has blamed an "unusual" spike in electricity consumption in the country on cryptocurrency miners, while warning that such illicit operations will be cut off from the grid.

Speaking earlier this week, Iranian Energy Ministry spokesman Mostafa Rajabi said increased digital-currency mining within the country had made the power grid "unstable" and caused problems for consumers.

The warning followed the shutting down of two cryptocurrency mining farms in the central province of Yazd, state-controlled TV reported on June 27.

The report said the mining farms, located in abandoned factories, had about 1,000 bitcoin mining machines.

Rajabi said electricity consumption in the Iranian month of Khordad, ending on June 21, increased by 7 percent, and that a large part of the hike was the result of digital-mining activities that involved high-powered computers.

He said a special price had not yet been set for the power used by cryptominers, though the government is reviewing an Energy Ministry proposal for such pricing.

Rajabi said the power for mining each Bitcoin equaled the power used by 24 residential units for an entire year.

Media reports have suggested cryptocurrency mining is increasing in Iran due to the relatively low electricity costs in the country, where it is heavily subsidized.

Earlier this month, Iran's deputy energy minister suggested there was an increasing number of cryptomining units operating in Iran, with some being based in locations such as "schools and mosques" that receive electricity for free.

The government daily Iran reported on a cryptocurrency-mining farm in forests in the north of the country where a 35-year-old man said he had installed cryptomining rigs next to his greenhouses to take advantage of the subsidized electricity he receives for operating an agricultural site.

The New York Times reported earlier this year on a Bitcoin mining site located in the desert outside the capital, Tehran.

A report by the Chinese site 8BTC, widely cited in Iranian media, said that since late 2018 Iran had become a "hotspot" for Chinese miners due to its cheap electricity.

A December 2018 report by quoted Nima Dehqan, a blockchain researcher at a Tehran-based crypto-startup Areatak, as saying that the firm had been meeting with foreign investors looking for cryptocurrency-mining opportunities in Iran.

"We have had investors visiting our farms from Spain, Ukraine, Armenia, and France," Dehqan said, adding that his firm had already signed a deal with a Spanish investor to set up mining farms in Iran.

Side-Stepping Sanctions

Reports have suggested that the U.S. sanctions that severely restrict financial and banking transfers in Iran are among the main reasons why some Iranians have been turning to cryptocurrencies, including Bitcoin, for transactions and the related mining activities.

The blockchain technology used in digital currencies allows financial transactions to be made quickly and securely while avoiding large banks.

The United States last year pulled out of the 2015 nuclear deal with Iran and other world powers and announced the reimposition of crippling sanctions that has led to a shrinking economy and the collapse of the national currency, the rial.

Iranian officials have said Tehran is contemplating the launch of a state-backed cryptocurrency to facilitate financial transactions.

The head of Iran's Bitcoin Society, Mohammad Shargi, told the official government news agency IRNA that cryptocurrency mines should be supported as a way to bypass sanctions.

"Mining these currencies inside Iran will not only prevent money from leaving the country, it will also create currency under the difficult conditions of sanctions," Shargi was quoted as saying by IRNA earlier this month.

Shargi also suggested that cryptocurrency mining should not be entirely to blame for the surge in electricity consumption in Iran. "We've always faced increased electricity consumption in the summer; [though] the cryptocurrency-mining farms have expanded in the country in the past two years," he said.

The United States has made it clear that it will crack down on Iranian businesses and economic transactions within the country, even those involving digital currencies.

In November, the U.S. Treasury Department targeted two Iranian citizens and the Bitcoin wallet addresses they had used for exchanging Bitcoin ransom payments on behalf of two hackers who, U.S. officials said, had been involved in a nearly three-year international computer-hacking and extortion scheme that affected more than 200 people and entities, including hospitals and government agencies.

"Treasury will aggressively pursue Iran and other rogue regimes attempting to exploit digital currencies," the department warned in 2018.

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    Golnaz Esfandiari

    Golnaz Esfandiari is a senior correspondent for RFE/RL focusing on Iran. She has reported from Afghanistan and Haiti and is one of the authors of The Farda Briefing newsletter. Her work has been cited by The New Yorker, The New York Times, The Washington Post, and other major publications. Born and raised in Tehran, she is fluent in Persian, French, English, and Czech.