Iran Shutting Down Crypto Mining Farms

In July 2019, the Iranian government had for the first time officially recognised the cryptocurrency mining sector as a legal industrial activity. Since then mining companies or mining farms have had to apply for licensing and permits for them to legally operate in Iran. The licensing and permits were all and are still handled by the Ministry of Industries of Iran. Thus, this became a safe heaven for crypto miner’s as back then and still now, there are only a few countries that legally recognise crypto mining and due to the lack of proper regulations in most countries, the miners always stay in constant fear from the law as they don’t really know for sure that what may the government suddenly say or do next that may jeopardise their whole farming business. Just recently, China had done the same by suddenly declaring the ban on cryptocurrencies and also banning the mining industry. This forced the miner’s to shift to other countries that legally allowed crypto mining along with their expensive mining rigs. This caused the miners to lose valuable time and money.

However, the issue started when Iran despite legalising crypto mining and having about 56 legal mining farms suddenly imposed a temporary mining ban in May 2021, forcing all the miners in the entire country to seize operations

Why Iran imposed a ban and started shutting down miners’?

It seems that due to the hot summer weather in Iran, the electricity consumption rate has gotten pretty high compared to what was expected, due to the increase of electrical appliances usages like fans, coolers and air-conditions. The consumption rate went so high that the rate of power cut also increased several folds. Thus, forcing the government to focus on this issue. As per Tavanir (Iran’s Power Generation, Distribution, and Transmission company), Iran generates a total of 60,000 megawatts of electrical energy per day from an installed capacity of 85,000 megawatts approx but there was still a deficit of 5,000 megawatts per day.

Upon further investigation, it was found that the main root cause was a sudden increase in illegal mining farms in the country. It was reported by Tavanir that these illegal mining farms were illegally guzzling away about an extra 2,000 Megawatts per day which equals to powering 3 million mining devices. However, the Ministry of Industries of Iran refuted this claim by stating that these figures are exaggerated. Tavanir further stated that the current 56 officially permitted crypto mining farms operating in the country only consume about 400 Megawatts per day. This was the major reason for which the Iranian government had to impose a temporary ban on the mining sector to resolve the major power cutting issue in the whole country.

Since then, Tavanir has constantly kept a strict vigil and has been able to shut down 5,380 illegal mining farms and seized over 2,16,758 pieces of mining equipment.

Why are the mining farms operating illegally?

The answer to this question is really simple, since April 2021, the Iranian government ramped up the electricity rates to match the current export rates. Hence, the government charged 16,574 rials ($0.39/₹28.88) per kilowatt-hour from official crypto mining farms which is four times higher than what is charged from a domestic household in Iran. This is the major reason for which these illegal crypto miners’ don’t get themselves registered and try to stay under the legal radar. So, they could illegally acquire the cheap subsidised electricity rates for domestic users.

Recently, in August, the Iranian government had announced that they will be lifting the ban on mining for authorised mining farms from September 22.

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