Iran presses the pause button on crypto mining, what does it mean?

This article sorts out Iran’s policy attitudes towards cryptocurrency mining and trading.

Iranian President Hassan Rouhan announced today (July 7) that all Bitcoin mining operations must “completely” stop production to ensure that there will be no power outages in important areas. It is not uncommon for Iran to “suspend mining” this time, and it will even happen again. But friends of miners don’t need to worry too much. In a short period of time, Iran’s mining environment as a “crypto-friendly country” is still among the best in the Middle East.

According to statistics from the Bitooda website, Iran is the world’s third largest Bitcoin holder after the United States and China, accounting for 8% of the total. For a long time, Iran’s position on cryptocurrency has been very clear (but also fragmented)-externally, it encourages the use of cryptocurrency to generate foreign exchange income and circumvents economic sanctions in Western countries; internally, it is illegal to use cryptocurrency transactions in its own country.

CoinWorld-Iran presses the pause button on crypto mining, what does it mean?

We believe that Iran cannot do without Bitcoin for three reasons:

1. Avoid economic sanctions

As early as 2017, Iran began to embrace cryptocurrency. Although the price of Bitcoin has high volatility and uncertainty, Iran welcomes “regulated” Bitcoin. In the final analysis, the birth of cryptocurrencies such as Bitcoin can help countries such as Iran to circumvent Western economic sanctions well. In May 2018, Iran reached a cooperation with Russia on the use of digital currency to resist economic sanctions. On September 17, Iran, North Korea, Russia, Venezuela and other countries countered US economic sanctions by forming a digital currency alliance. Since then, the United States has continued to block Iran’s activities related to encryption, and even proposed the so-called “Iranian Illegal Finance Act” in December 18 to facilitate the smooth progress of sanctions.

2. Attract foreign exchange to generate income

According to a report from an Iranian think tank on March 2nd, the entire Bitcoin network alone will generate US$22 million in revenue for the Iranian government every year in the field of bulk goods transactions. As an export-oriented country, Iran is good at using cryptocurrency as a tool. On January 30, 2019, Iran and eight countries including Switzerland, South Africa, France, the United Kingdom, Russia, Austria, Germany and Bosnia used cryptocurrency in financial transactions. Negotiations are held in the hope that Iran will be able to attract foreign investors into the country. In December 2019, Iran also proposed to create a cryptocurrency for Muslim countries to replace the U.S. dollar.

3. Efficient use of energy

Countries outside the “Western banking system” such as Venezuela, Brazil, and Iran, have oil, but cannot sell it freely to the market. Some analysts said that aside from policy restrictions, these countries will inevitably use oil-based energy to mine cryptocurrencies on a large scale in the next ten years driven by the market. The Iranian authorities’ attitude towards mining is more relaxed than that of cryptocurrency transactions. As early as September 2018, Iranian officials readily admitted that “cryptographic mining is an industry”, marking the legality of mining in the country. Since then, the introduction of many regulatory actions on the mining industry has actually promoted the sustainable development of the mining industry. Internally, Iran has continuously proposed policies and regulations to urge miners and large miners to register for compliance; externally, it has continuously accepted foreign capital for mining investment in Iran. After China cleared out a large number of mines in June, Iran also became one of the positions that the mining industry moved for the first time.

CoinWorld-Iran presses the pause button on crypto mining, what does it mean?

Although cryptocurrency and its industry have brought many dividends to Iran, there are also pervasive crises:

1. Electricity crisis

In response to the power crisis in May of this year, a spokesperson for the Iranian Ministry of Electricity said: “The hot weather, industrial prosperity has led to an increase in electricity consumption, drought has reduced hydroelectric power generation, and Iran’s private cryptocurrency’mines’ consume too much electricity, etc. This led to this serious power crisis. “Although Iran has a lot of oil resources, hydroelectric power is still Iran’s main power generation method. The continuous mining of encrypted mines has brought serious problems to the lives of local people. The site was declared closed, but there are still some miners operating illegally. On July 5th, people in many cities organized protests. It is time for the mines with increasing volume and energy consumption to lower the fire. Of course, the power outage of the mine is only temporary and will be restored on September 22. The shortage of power resources has led to some red lines in the distribution of mining companies. The capital Tehran and the central city of Isfahan have stricter restrictions in these places.

2. Domestic inflation and currency crisis

In April 2018, Iran imposed a severe cryptocurrency ban due to a currency crisis in the country’s fiat currency, the Rial, but the ban was lifted soon after. In order to balance the gains of cryptocurrencies and the depreciation of the national currency, Iran has also taken some measures. In 2019, Iran required registered miners to sell their income to banks. On May 7 this year, the Central Bank of Iran (CBI) banned the trading of Bitcoin and other cryptocurrencies mined outside the country. Lawyer Fatemah Fannizadeh said that this means that Iran hopes to more actively export the tokens mined by Iran, encourage mining, and further combat capital flight.

CoinWorld-Iran presses the pause button on crypto mining, what does it mean?

The formulation of Iran’s cryptocurrency policy and related laws and regulations is based on the above-mentioned factors. In just a few years, we have witnessed its policy repeatedly fluctuating between relaxation and tightening. As an export-oriented country in the Middle East region that is rich in oil resources, it is impossible for Iran to abandon cryptocurrency and its industry in a short period of time. Therefore, despite the long duration of the power outage in the mine, miners need not worry too much.

Posted by:CoinYuppie,Reprinted with attribution to:
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