From threat to business opportunity, Iran could be working towards making crypto-mining profitable. Revealed this Sunday, Iran gave the green light to the mining of cryptocurrencies in the country.
According to the Iran Chamber of Commerce, Industries, Mines and Agriculture, Iran authorized the mining of cryptocurrencies yesterday, making it an official industrial activity. The decision by a government economic commission to make crypto mining legal came one week after a committee gave its green light on June 21st. On that date, the governor of the Central Bank of Iran, Abdolnaser Hemmati, said :
“A mechanism to mine digital coins was approved by the government’s economic commission and will later be put to discussion at a cabinet meeting.”
Miners are required to acquire a license with the Iranian Ministry of Industry, Mines and Trade. The decision comes a long period of uncertainty as the Iranian government decided whether to approve of crypto mining as an industry or not. Just last month, authorities seized two mining farms and shut them down.
A revisited electricity rate for mining farms
Iran is currently a crypto mining haven, with low energy fees attracting miners from around the world. This is due to government subsidies granted to power generation. As per the International Energy Agency, Iran spent more than $45 billion on fossil energy consumption subsidies in 2017.
As a result, the country experiences a wave of miners over the past few years that caused disruptions in the distribution of energy across certain regions. Among those eager to pursue this activity in the country are countries such as China, Ukraine, Armenia, Spain and France.
However, it seems as if the mining farms won’t benefit from low prices much longer. According to the Deputy Minister of Energy Homayun Haeri, the primary condition to let miners operate in Iran would be the payment of energy bills without the subsidy offered to residential consumers.
Reportedly, the electricity price is at $0.03 per kilowatt-hour (kWh) as of March. According to a spokesperson from a state-operated energy company, the electrical consumption had spiked by 7% in June, compared to the previous year.
As per the Mehr News Agency, the government plans to raise the prices for miners to $0.07 per kWh. This is still relatively low and sits below the global average of $0.015 per kWh. However, it’s at about the same rate as China, which is another crypto mining hotspot.
The ministers are expected to vote on a measure to approve an electricity rate for the farms soon. If this measure is approved, Iran would be stimulating its economy while receiving an extra income. And this something that hasn’t been pleasing the Americans.
Has mining become a geopolitical issue?
The U.S regulators are worried about Iran using the mining farms to continue bypassing sanctions. It seems as if the U.S government is working on a draft to sanction crypto mining in Iran, according to statements released by Iranian officials. While that is not confirmed, this measure would be in line with overall U.S stance against Iran.
Unilateral sanctions have been imposed by the Americans, causing an increase in tension between the two countries. As a result, the middle-eastern government has been more favorable to the use of digital currencies, even if no specific position has been taken.
Even though the regulation of cryptocurrencies remains in a “legal void”, Iran has been working on creating its own sovereign cryptocurrency, the Crypto-Rial. Announced in February of this year, the digital currency was adopted as a way to bolster the country’s economy and monetary system through the use of cross-border transactions. After Iran was excluded from the SWIFT system, this was seen as a way of promoting commercial relationships beyond the prying eyes of the West.
Cryptocurrency mining was still in the same void until yesterday. Ears are raised in the American soil as this green light can be seen as a way to develop the crypto industry and consequently obtain income from outside the traditional financial system. Thus, bypassing sanctions.
This move comes after China asked for better conditions in the crypto mining farms. Given that many of the miners are Chinese, the questions remains if these facts are isolated or if it the quick response from the Iranian government is correlated. Also, it’s uncertain if the high presence of Chinese miners will have any influence on the American’s decision to sanction crypto mining.
Despite the Iranian’s friendly stance towards mining, it doesn’t seem as if Iran is planning to revisit the use of cryptocurrencies in the country.