Iran bans crypto mining due to power consumption

Iran Prohibits Effective immediately, the Mining of cryptocurrencies such as Bitcoin and Ethereum. According to the government, this is necessary to keep the electricity grid afloat during the summer. It Mining Virtual currencies cost a lot of energy, especially in the hot summer months when the air conditioning has to work harder. The ban will last until September 22, President Hassan Rouhani said on national television.

Through cheap electricity and economic sanctions, it has Mining in Iran has taken off in recent years. For example, the country has an estimated 4.5% of all computing power on the Bitcoin network. This places a large burden on energy consumption, because at the beginning of this year it was Mining of cryptocurrencies in Iran accounts for a power consumption of 600 megawatts. For comparison, that's as much as the production of an average coal-fired power plant.

Iran's market share in global Bitcoin mining network (Source: Elliptic)

The energy consumption of the Mining has only increased further in recent months, as the prices of many cryptocurrencies have risen sharply. And that is causing problems in Iran, because hydroelectric power plants are generating less power due to the recent drought. As a result, the power network is at risk of becoming overloaded, especially if temperatures rise further and more air conditioning is needed. It Mining of one Bitcoin currently requires Equal amount of power as the annual energy consumption of 24 Iranian households.

Total computing power of the global Bitcoin network has increased significantly (Source: Blockchain.com)

Bitcoin mining

The government of Iran has been struggling for some time with the high power consumption of the Mining, while it makes it even more attractive by subsidising electricity for private individuals. Due to a discount of the equivalent of 4 euro cents per kilowatt hour, it is relatively cheap to Bitcoin Mining. Especially with the high prices of recent months, it is very profitable. Many Chinese companies have established themselves in a special economic zone in southeastern Iran, where they can benefit from low electricity prices.

In order to Mining the government is now handing out rewards to people who commit illegal Miners indicate. This reward can amount to 200 million Iranian rials, which is almost four thousand euros. So far this year, the authorities have confiscated hundreds of computers hidden in homes, garages and business premises. As a result of this ban, more Miners move their activities abroad.

Cryptocurrencies as a means of payment?

This change of course by the Iranian government is striking, because earlier this year a government think tank report on the usefulness of cryptocurrencies. It showed that Iran can benefit from the crisis in two ways. Mining. Firstly, because it is a profitable activity at current prices and secondly because the cryptocurrencies can be used to circumvent US sanctions against the banking system. For example, the country can use Bitcoin and Ethereum to Import of goods to deal with.

This contribution comes from Geotrendlines