Iran, pressured by blackouts and pollution, targets Bitcoin

Iran is among the top 10 countries with the most Bitcoin mining capacity in the world - 450 megawatts a day. It authorised 24 Bitcoin processing centres that consume an estimated 300 megawatts of energy a day, attracted tech-savvy Chinese entrepreneurs to tax-free zones in the countrys south and permitted imports of computers for mining.

PTI | Tehran | Updated: 22-01-2021 14:45 IST | Created: 22-01-2021 14:14 IST
Iran, pressured by blackouts and pollution, targets Bitcoin
Representative image Image Credit: ANI

Iran's capital and major cities plunged into darkness in recent weeks as rolling outages left millions without electricity for hours. Traffic lights died. Offices went dark. Online classes stopped. With toxic smog blanketing Tehran skies and the country buckling under the pandemic and other mounting crises, social media has been rife with speculation. Soon, fingers pointed at an unlikely culprit: Bitcoin. Within days, as frustration spread among residents, the government launched a wide-ranging crackdown on Bitcoin processing centres, which require immense amounts of electricity to power their specialised computers and to keep them cool - a burden on Iran's power grid. Authorities shuttered 1,600 centres across the country, including, for the first time, those legally authorised to operate. As the latest in a series of conflicting government moves, the clampdown stirred confusion in the crypto industry - and suspicion that Bitcoin had become a useful scapegoat for the nation's deeper-rooted problems. Since former President Donald Trump unilaterally withdrew in 2018 from Tehran's nuclear accord with world powers and re-imposed sanctions on Iran, cryptocurrency has surged in popularity in the Islamic Republic. For Iran, anonymous online transactions made in cryptocurrencies allow individuals and companies to bypass banking sanctions that have crippled the economy. Bitcoin offers an alternative to cash printed by sovereign governments and central banks - and in the case of Iran and other countries under sanctions like Venezuela, a more stable place to park money than the local currency. "Iranians understand the value of such a borderless network much more than others because we can't access any kind of global payment networks," said Ziya Sadr, a Tehran-based Bitcoin expert. "Bitcoin shines here.'' Iran's generously subsidised electricity has put the country on the crypto-mining map, given the operation's enormous electricity consumption. Electricity goes for around 4 cents per kilowatt-hour in Iran, compared to an average of 13 cents in the United States. Iran is among the top 10 countries with the most Bitcoin mining capacity in the world - 450 megawatts a day. The US network has a daily capacity of more than 1,100 megawatts. On Tehran's outskirts and across Iran's south and northwest, windowless warehouses hum with heavy industrial machinery and rows of computers that crunch highly complex algorithms to verify transactions. The transactions, called blocks, are then added to a public record, known as the blockchain. "Miners" adding a new block to the blockchain collect fees in bitcoins, a key advantage amid the country's currency collapse. Iran's rial, which had been trading at 32,000 to the dollar at the time of the 2015 nuclear deal, has tumbled to around 240,000 to the dollar these days. Iran's government has sent mixed messages about Bitcoin. On one hand, it wants to capitalise on the soaring popularity of digital currency and sees value in legitimising transactions that fly under Washington's radar. It authorised 24 Bitcoin processing centres that consume an estimated 300 megawatts of energy a day, attracted tech-savvy Chinese entrepreneurs to tax-free zones in the country's south and permitted imports of computers for mining. Amir Nazemi, deputy minister of telecommunications and information, declared last week that cryptocurrency ''can be helpful" as Iran struggles to cope with sanctions on its oil sector. On the other hand, the government worries about limiting how much money is sent abroad and controlling money laundering, drug sales and internet criminal groups. Iranian cryptocurrency miners have been known to use ransomware in sophisticated cyber attacks, such as in 2018 when two Iranian men were indicted in connection with a vast cyber assault on the city of Atlanta. On Thursday, British cybersecurity firm Sophos reported it found evidence tying crypto-miners in Iran's southern city of Shiraz to malware that was secretly seizing control of thousands of Microsoft servers. Iran is now going after unauthorised Bitcoin farms with frequent police raids. Those who gain authorisation to process cryptocurrency are subject to electricity tariffs, which miners complain discourage investment. "Activities in the field are not feasible because of electricity tariffs," said Mohammad Reza Sharafi, head of the country's Cryptocurrency Farms Association. Despite the government giving permits to 1,000 investors, only a couple dozen server farms are active, he added, because tariffs mean Bitcoin farms pay five times as much for electricity as steel mills and other industries that consume far more power. Now, miners say, the government's decision to close down major Bitcoin farms operating legally seems designed to deflect concerns about the country's repeated blackouts. Mashhadi, spokesman of Iran's electricity supply department, noting that illegal farms sucked up daily some 260 megawatts of electricity. Although Bitcoin mining strains the power grid, experts say it's not the real reason behind Iran's electricity outages and dangerous air pollution. The telecommunications ministry estimates that Bitcoin consumes less than 2% of Iran's total energy production.

(This story has not been edited by Devdiscourse staff and is auto-generated from a syndicated feed.)



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