Iran has a love-hate relationship with the crypto mining industry. Despite understanding the promise of crypto as a tool to dodge international sanctions, the government is once again prohibiting crypto mining operations in order to relieve the load on the country’s power supply.
Electricity to all 118 government-authorized mining operators in Iran will be cut off from June 22 ahead of seasonal spikes in power demand, Mostafa Rajabi Mashhadi, spokesman for Iran’s power industry said in an interview with state TV, per a Bloomberg report.
Bitcoin has long been considered and used as a way for countries to circumvent trade embargoes. Iran is under sweeping sanctions by the US that effectively bars it from accessing the international financial system.
In 2019, Iran officially recognized the crypto mining industry and began issuing licenses to miners, which are required to pay higher electricity rates and sell their mined bitcoins to Iran’s central bank.
But the country has also repeatedly halted operations of crypto mining centers. The government ordered two shutdowns to mitigate pressure on its power infrastructure last year, during which electricity demand hit a record high.
Crypto mining was booming in Iran before the bans. Blockchain analytics firm Elliptic estimated in May last year that 4.5% of all Bitcoin mining took place in the country. That ratio was down to 0.12% as of January, according to the Cambridge Centre for Alternative Finance (CCAF).
Other countries’ miners have taken a stand against authorities. Between July and August of last year, China’s crypto hash rate, which measures the computational power utilized by proof-of-work cryptocurrencies like Bitcoin, dropped to zero, following the country’s strongest crackdown on crypto mining.
However, the sector looked to have soon recovered. According to CCAF, China accounted for 30% of the world’s crypto hash rate in September, and by January, it had risen to about 40%, second only to the United States.
The rebound indicated that underground mining might have been well underway in China, where crypto trading is also banned. “Access to off-grid electricity and geographically scattered, small-scale operations are among the major means used by underground miners to hide their operations from authorities and circumvent the ban,” said CCAF in an analysis.According to CCAF, the quick decline and resurrection of China’s hash rate revealed that its miners may have been functioning covertly shortly after the ban by rerouting their data through proxy services. They may have gotten less concerned about masking their positions as time progressed and the regulation took effect.