Iran Plans to Tighten Punishments for Illegal Cryptocurrency Mining

The Tehran Times reported that the Iranian government is about to adopt new rules that will increase the penalties for illegal cryptocurrency mining.

Under the new rules, fines for illegal mining companies using subsidized electricity will be increased by at least three to five times compared to the previous one, and if they violate it again, their business license will be revoked.

An official from the Iranian electricity generation, distribution and transmission company (known as Tavanir) has announced that the government will adopt new rules to tougher penalties for illegal cryptocurrency mining using subsidized electricity.

“Any use of subsidized electricity intended for households, industrial, agricultural and commercial subscribers for cryptocurrency mining is prohibited,” said Mohammad Hodadadi Bohluli.

According to Khodadadi, illegal mining causes power outages and reduces the quality of power supply in the country’s national power grid.

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Bitcoin miners use specialized, energy-intensive devices that use highly specialized cryptographic ASIC chips to try to find or mine the string of numbers needed to create new blocks of data. Many companies have started cryptocurrency mining in Iran after the Iranian government approved it as an industrial activity in 2019. This was made possible by cheap electricity. Now Iranian power plants see this as an opportunity to boost their revenues.

In January 2020, the Ministry of Industry, Mining and Trade registered over 1,000 mining companies. However, some unauthorized miners and government-approved institutions have begun using household electricity to mine cryptocurrencies. This has caused significant problems for the country’s electricity sector, which is already struggling with severe drought and low rainfall, consuming more than 600 MW of electricity.

Crypto miners must pay for network damage

Mostafa Rajabi Mashhadi , a spokesman for the Iranian Ministry of Energy, stated in May 2021 that crypto miners using subsidized electricity would be subject to a severe fine if they were caught.

Rajabi Mashhadi said that in addition to paying fines, miners also have to pay for the damage caused to the power grid.

Mashhadi Rajabi noted that illegal mining of cryptocurrencies causes problems with electricity supply due to damage to transformers and the local power grid. He also noted that the continued activity of these miners may make it difficult to obtain electricity and increase the likelihood of power grid failures and blackouts.

However, according to a December 2021 Forbes article, decades-old U.S. sanctions on the region discourage investment in legacy infrastructure, making hardware more vulnerable to degradation and failure, whether miners use it or not.

Can the problem be solved in a mutually beneficial way, so that infrastructure and people benefit? Can allowing bitcoin mining benefit the network?

Iran’s green efforts face ‘energy supply problem’

Iran makes no secret of its desire to be green.

It generated 98% of its energy from natural gas and oil in 2019, according to the International Energy Agency (IEA).

The Department of Energy, Renewable Energy and Energy Efficiency Organization (SATBA) attempted to reduce its dependence on fossil fuels in October 2021 by inviting the private sector to help develop and build renewable energy power plants with a total daily capacity of 10,000 megawatts.

The problem with Iran is that, in addition to the constant threat of sanctions, achieving this goal requires foreign expertise and heavy capital investment. In addition, building power plants is only part of the solution. A more serious problem is the transmission of electricity from remote areas where renewable energy sources are used to all cities, towns and villages throughout the country.

Iran can avoid the logistical and financial hurdles associated with the green revolution by simply buying cryptocurrency mining machines and turning them on when there is surplus power at its new power plants.

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