Facing smog and blackouts, Iran blames illegal Bitcoin mining

Campbell MacDiarmid
·2-min read
Iran has ordered the closure of illegal Bitcoin operations, as energy shortages have contributed to air pollution  - ATTA KENARE /AFP
Iran has ordered the closure of illegal Bitcoin operations, as energy shortages have contributed to air pollution - ATTA KENARE /AFP

Iranian authorities have blamed a novel culprit for rolling blackouts and heavy smog in major cities this winter: illegal cryptocurrency mining.

In recent weeks air pollution in the capital Tehran and other metropolitan areas in Iran has reached hazardous levels, while residents report widespread power cuts.

Winter cold has increased demand for domestic heating, creating a shortage of natural-gas And forcing power plants to burn low-grade fuel oil, contributing to the pollution, the semi-official Iranian Students’ News Agency reported.

But the Islamic Republic News Agency reported that President Hassan Rouhani has instructed his security apparatus to crackdown on another energy-intensive practice: illegal bitcoin farming.

Cryptocurrencies like Bitcoin rely on decentralised registers of transactions that are verified by miners who solve complex computational math problems to earn new units of currency.

The process consumes large amounts of electricity and mining at scale only makes economic sense where energy is cheaply available.

Watch: What is bitcoin?

In August 2019 Iran passed a law regulating cryptocurrency in hopes that it could be used to bypass the effects of US economic sanctions. The law allocated 600 MWh of subsidised energy to be used for authorised cryptocurrency mining.

But with the value of cryptocurrency soaring - Bitcoin has increased in value sevenfold since the start of the pandemic to reach a record high of over £30,000 earlier this month - illegal crypto farming has also proliferated in Iran.

Authorities recently closed a licensed Chinese-Iranian crypto farm temporarily, after state media reported it had been consuming 175 megawatt-hour MWh of power.

Rajab Mashhadi, a spokesman for Iran’s electricity industry union, said last week that 1,620 illegal cryptocurrency outfits had been closed, accounting for about 250 MWh of electricity.

But with peak demand reaching 41,000 MWh nationwide, some experts say crypto mining is a drop in the ocean.

“I think the miners are being scapegoated,” said Esfandyar Batmanghelidj, founder of Bourse & Bazaar. “This isn't the real cause of the strain on the network.”\