Iran’s government announced a ban on the mining of bitcoin and other cryptocurrencies, the country’s president, Hassan Rouhani, announced Wednesday, as officials blame the energy-intensive process for blackouts in a number of Iranian cities.
The ban is effective immediately and will be in place until Sept. 22, Rouhani told state TV, in the latest sign of high-profile rejection of the popular digital currency.
The Iranian capital of Tehran and several other large cities have faced multiple daily power outages for the past few months, and officials blame it on a natural gas shortage, a prolonged drought that’s hobbled the country’s hydroelectricity plants — and, increasingly, bitcoin mining.
And a majority of the energy consumption from bitcoin mining is coming from illegal miners, or those operating without licenses, government officials say.
That’s prompted a nationwide crackdown on illegal bitcoin miners as well as temporary electricity cuts to legal bitcoin farms as power demand surges, thanks to increased consumption due to coronavirus stay-at-home orders. As temperatures in the country rise, power consumption in recent weeks has been so high that some medical facilities have struggled to run their cold-storage facilities for Covid-19 vaccines.
In January, Iranian police confiscated nearly 50,000 bitcoin mining machines that were using subsidized electricity illegally. The miners had been consuming 95 megawatts per hour at cheap state-subsidized rates, according to Iran’s state-run power company Tavanir.
Iran’s government says that 85 percent of bitcoin mining in the country is done illegally. The country of 82 million is home to 50 licensed mining farms, which use a total of 209 megawatts of power, Tanavir said Wednesday.
The cryptocurrency, which hit record high prices in April above $63,000 per coin, has come under fire of late for the energy-intensiveness behind its production and its consequent environmental cost.
Bitcoin miners use purpose-built computers to solve complex mathematical equations that effectively enable a bitcoin transaction to go through. The miners are rewarded for their efforts in the digital currency.
However, the entire process is incredibly energy intensive because of the amount of power used by the computers.
Iran among top 10 bitcoin mining countries
Tehran allows cryptocurrencies mined in Iran to pay for imports of goods, which can help it get around the wide-ranging U.S. sanctions that had been imposed on the country by the Trump administration. Iran’s central bank forbids trading cryptocurrencies mined abroad, though these can be found on the black market, according to Iranians living in the country.
Around 4.5 percent of all bitcoin mining globally took place in Iran between January and April of this year, according to blockchain analytics firm Elliptic. That put it among the top 10 in the world, while China came in first place at nearly 70 percent.
China in mid-May announced its own ban on financial and payment entities providing services for crypto transactions, which sent bitcoin and several other digital currencies tanking. In April, Turkey’s central bank banned the use of cryptocurrencies and crypto assets, citing transaction risks.
The move from Iran and China comes after a bombshell decision by Tesla CEO Elon Musk to suspend allowing purchases of the company’s vehicle’s in bitcoin, citing climate change concerns. The coin’s price declined by 10 percent, and fell far further after China’s ban, dropping as low as $30,000 before paring some losses.
Bitcoin jumped Monday, nearing $40,000 after Musk said that he’d held “potentially promising talks” with North American bitcoin miners on how to make the process more environmentally sustainable. The digital currency was trading around $38,800 on Wednesday at 2:25 p.m. ET, up about 4 percent on the previous day.