Syed Zafar Mehdi
14 January 2021•Update: 14 January 2021
TEHRAN
Amid severe power outages across Iran in recent weeks, a major cryptocurrency mining plant jointly operated by an Iranian-Chinese investment firm in the country’s southeast has been temporarily shut down.
Iran’s state-owned electricity firm Tanavir made the announcement on Wednesday after a viral video showing thousands of bitcoin machines operating at the facility in Rafsanjan city of Kerman province.
According to state media, the bitcoin mining farm in Rafsanjan had alone been using 175 megawatt-hour (MWh) of electricity from the total 600 MWh allotted to all cryptocurrency factories in the country.
This came amid an unprecedented surge in demand for electricity that has led to frequent blackouts in the country in recent weeks. The electricity usage in peak hours reached 41,000 MWh in recent days.
Authorities say consumption of gas in households has increased in winter months, making electricity generation a challenge. Power plants have to use dirty fuel oil, instead of gas, to generate electricity.
While the Iran-China bitcoin farm, authorities claim, has been operating with the requisite legal license, there are thousands of “unauthorized” bitcoin extraction centers across the country.
Rajab Mashhadi, a spokesman for Iran’s electricity industry union, said a total of 1,620 illegal cryptocurrency firms that consumed around 250 MWh of electricity have been inactivated.
Means to finance imports
The government in Iran had in August last year introduced amendments in regulations related to cryptocurrencies, aiming to use them for funding imports amid problems in using hard currency.
According to a proposal pitched by the central bank and the Energy Ministry, the legally mined bitcoins were supposed to be used only to finance imports from other countries.
The legislation permitted only a certain amount of subsidized energy to be used by each authorized miner, based on the guidelines issued by the Energy Ministry.
However, there have been widespread concerns over the “illegal” use of bitcoin mining, with thousands of cryptocurrency farms mushrooming across the country.
Mahmoud Vaezi, the chief of staff in the Iranian president’s office, responding to the government’s alleged role in illegal bitcoin mining, recently said there has been “pressure to regulate it in some way”.
He said the bitcoin firms need to obtain legal permission from the government, which clearly defines the limitations and protocol for extraction processes.
While the use of bitcoin is seen as one of the ways to counter US sanctions, with one lawmaker recently suggesting that it can bring it more revenue than the export of oil under sanctions, there have been concerns over its burden on the country’s electricity grid.
Bitcoin mining, which takes place in high-tech grids with many high-processing computer systems, puts enormous pressure on the demand for electricity, experts assert.
