In May, Iran issued a four-month temporary ban on crypto mining. However, according to the media, the CEO of the Iran Power Generation, Distribution and Transmission Company (locally known as Tavanir) confirmed that the temporary ban will be lifted on September 22, and all authorized miners will be able to resume mining.
Back in July 2019, Iran recognized crypto mining as a legal industrial activity, but miners must first obtain permits from the Ministry of Industry. To date, the Ministry has issued permits to 30 mining entities, which attracted droves of miners from all over the world. However, since January, more than ten provinces and cities in Iran have suffered large-scale blackouts. To cope with the power shortage caused by the peak power consumption in summer, on May 26, Iranian President Hassan Rouhani announced a ban on crypto mining.
The ban of all crypto mining, regardless of whether the miner is licensed, is primarily a result of the surge in the power consumption of mining. Illegal miners consume about 3,000 megawatts of electricity per day, which is ten times that of licensed miners. In some areas, power failures have disrupted the day-to-day lives of locals, and many citizens took to the streets to protest against the issue. To alleviate the power shortage, the government had to issue a four-month ban.
Iran, a country in West Asia, is part of the Middle East. The country has an area of about 1.635 million square kilometers, which is about the size of Alaska. According to the country’s population statistics in 2019, Iran has a total population of around 81.65 million, which is less than the population of some Chinese provinces. As a country in the Middle East, Iran has abundant reserves of oil and natural gas, and its economy is also largely driven by oil exploration. In the past few years, the electricity price in Iran remained low and the power supply had also been stable, which partly explains its attraction for global miners.
In September 2017, then President Donald Trump issued a new travel ban, the targets of which included Iran. For a long time, the country has remained the target of economic sanctions imposed by the United States and other countries, leading to sluggish economic development in recent years. Meanwhile, Iran has also suffered from problems such as inflation and currency devaluation. It has been reported that Iran’s inflation rates in 2018 and 2019 were 34.6% and 36.5%, respectively. As such, alternative legal tenders such as the dollar are very appealing to authorities in Iran. Furthermore, in the face of inflation, the Iranian people also wish to have another store of value. According to the Cambridge Bitcoin Mining Map, before the ban, Iran accounted for 4.64% of the global Bitcoin hash rate. This earned the government hundreds of millions of dollars, which could alleviate the impact of US sanctions.
According to informed sources, even if the ban is lifted, there is no easy way for mining farms to restore their previous profit margins, as Iran has released stringent new regulations. In addition to a sharp price increase of electricity, these regulations also require all authorized miners to make a lump-sum deposit equivalent to 6 months of electricity bills. Moreover, the power department has asked miners to make the deposit before September 7; otherwise, electricity will not be available on September 22. It is estimated that the electricity price of the country after September 22 will reach $0.085 per kilowatt-hour.
Considering that the total capacity of power generation will remain the same as Iran resumes mining, once the relevant electricity policies are officially launched, it is unclear whether the country can provide a stable power supply. Plus the taxes and operating costs, perhaps Iran is no longer the best choice for miners looking for low electricity prices and loose regulations.