Iran has banned cryptocurrency extraction for four months as the energy-intensive industry has unleashed electrical voltages across the country.
In recent weeks, businesses and families in Iran have experienced interruptions of up to six hours a day. Constant blackouts cost Iranian chess players their game in an online Asian championship.
“Everyone is finding a corner to undermine bitcoins and cryptocurrencies,” President Hassan Rouhani said Wednesday. “Whoever does this today is doing illegal work even those who have been allowed to [to mine bitcoins] they are no longer allowed until we leave this problem behind [of power cuts]. ”
Iran’s economy has been hit hard by Donald Trump’s decision to unilaterally pull the United States out of the nuclear deal signed by Tehran with world powers and impose paralyzing sanctions. The demand for digital currencies in Iran has grown in recent months as people seek to cover their savings against an annual inflation rate of 46.9 percent, a falling stock market and stagnant house prices.
Mercuri Rouhani ordered the ministers of industry, telecommunications, energy and interior to control cryptocurrencies. He said electricity consumption had increased by 20% for the last year, although he did not clarify how much of this was caused by cryptocurrencies. This is the second time that Iran is trying to recover digital currencies.
The extraction of cryptocurrency has started in Iran in part because of the availability of highly subsidized electricity for what is an energy-intensive industry. Imports can, in theory, be paid with bitcoins. But U.S. sanctions prevent any banking transactions with Iran and blockchain technology records the details of transactions, making it difficult for Iranian traders to use cryptocurrency to evade sanctions.
“We have not been able to establish connections to reliable digital currency exchanges due to sanctions and our little experience,” said a businessman close to the regime.
In 2018, the U.S. Treasury Department identified two digital currency addresses and associated them with two Iran-based individuals who allegedly helped exchange bitcoin ransom payments in Iranian reals. The Treasury has made a promise to “aggressively pursue Iran and other rogue regimes that try to exploit digital currencies.”
Despite this, overseas investors, including China, have invested in cryptocurrency mining in Iran. A Chinese-run operation in Rafsanjan, in southern Iran, is estimated to be the largest in the country.
Polish, Indian and Turkish companies have also received permission to exploit bitcoin in Iran, Majid-Reza Hariri, head of the Iran-China Chamber of Commerce, said on Tuesday.
Analysts are divided on whether bitcoin mining is really to blame for electricity cuts. Bitcoin extraction, including illegal transactions, accounts for less than 10 percent of the country’s electricity production. They also blame this year’s severe drought for the lack of electricity.
It is also unclear how easy it will be to enforce the restrictions. Last week, the energy minister tried to shut down an operation, but was met with gunfire.
Meanwhile, demand remains high. “My friend sold her apartment last year and bought bitcoins which made her money multiply for a year. I think I should take the risk too, ”said Anousheh, a 35-year-old employee of a publishing company.