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Iran Capital Officials Tack on Harsher Punishments for Illegal Crypto Mining

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In Brief

  • Iranian energy officials warn of fines and imprisonment for illegal bitcoin miners.
  • They cite damage to the power grid as the main reason for the punishments.
  • Bitcoin mining could solve Iran's energy infrastructure crisis.
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An official from Iran’s Power Generation, Distribution, and Transmission Company (known under Tavanir) announced that the government would pass new regulations to more harshly punish illegal crypto mining using subsidized electricity.

“Any use of subsidized electricity, intended for households, industrial, agricultural, and commercial subscribers, for mining cryptocurrency is prohibited,” said Mohammad Khodadadi Bohlouli. Illegal mining is responsible for power outages and reduces the quality of electricity supply in the country’s national grid, said Khodadadi.

Bitcoin miners employ power-hungry computers to try to find or mine a string of numbers that are needed to make new blocks of data. Many companies began crypto mining in Iran after the Iranian government approved it as industrial activity in 2019. This was possible thanks to the low-cost electricity. Now, Iranian power plants see this as an opportunity to grow their revenue.

In January 2020, the Ministry of Industry, Mining, and Trade registered over 1000 mining companies. However, some unauthorized miners and government-approved establishments have started using household electricity for crypto mining. This has caused significant problems for the country’s electricity sector, which is already struggling with severe drought and low rainfall, consuming more than 600 MW of electricity.

Crypto miners must pay for damages to the grid

Mostafa Rajabi Mashhadi, Iran’s Energy Ministry’s spokesperson for the electricity sector, stated in May 2021 that crypto miners who use subsidized electricity would be subject to a severe fine if they were identified.

Rajabi Mashhadi said that in addition to paying the fines, miners must also pay for damages to the electricity grid.

Mashhadi Rajabi pointed out that illegal crypto mining causes problems in electricity supply due to damage to transformers and the local power grid. He also noted that the continued activity of these miners could make it more difficult to get power and increase the possibility of blackouts.

However, according to a Forbes article from December 2021, decades-old U.S. sanctions on the region have hampered investment in aging infrastructure, which makes the equipment more vulnerable to degradation and failure, irrespective of whether miners are using them or not.

Could the problem be solved in a mutually beneficial way for the infrastructure and the people to benefit? Could allowing bitcoin mining benefit the grid?

Iran’s green efforts face the ‘stranded energy problem’

Iran has not hidden its desire to be green.

According to data from the International Energy Agency (IEA), it produced 98% of its natural gas and oil energy in 2019.

The Ministry of Energy, Renewable Energy and Energy Efficiency Organization (SATBA) attempted to decrease its dependence on fossil fuels in October 2021 by inviting the private sector to assist with developing and constructing renewable power plants with a total daily capacity of 10,000 megawatts.

The problem with Iran is that, aside from the ever-present threat to sanctions enforcement, reaching this goal requires foreign expertise and heavy capital expenditure. Also, building power plants is just one part of the solution. The more significant challenge lies in transmitting electricity from remote areas where renewable energy is sourced to all cities, towns, and villages across the country.

Iran can avoid the logistical and financial hurdles associated with a green revolution simply by purchasing crypto mining machines and turning them on when its new power plants have excess energy.

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David Thomas
David Thomas graduated from the University of Kwa-Zulu Natal in Durban, South Africa, with an Honors degree in electronic engineering. He worked as an engineer for eight years, developing software for industrial processes at South African automation specialist Autotronix (Pty) Ltd., mining control systems for AngloGold Ashanti, and consumer products at Inhep Digital Security, a domestic security company wholly owned by Swedish conglomerate Assa Abloy. He has experience writing software in C,...