The President of Iran has banned the energy-intensive cryptocurrency mining for 4 months. The main reason for this move is because the country is facing major power blackouts in many cities.
President Rouhani further said, “The ban on mining is effective immediately until 22nd September. Around 85% of the current mining in Iran is unlicensed.”
How Cryptocurrencies are created?
Bitcoin and other blockchain enabled cryptocurrencies are created through mining. Herein powerful computers compete with each other to solve complex mathematical problems. The process is highly energy intensive. It often relies on electricity generated by fossil-fuels and Iran is very rich in fossil-fuels. According to blockchain analytics firm Elliptic, around 4.5% of global Bitcoin mining of bitcoin takes place in Iran. This is an important source of revenue for Iran. It allows Iran to earn millions of dollars, which are then used to lessen the impact of sanctions imposed by former US President, Donald Trump.
Upcoming Presidential Elections
Another major reason for this is the upcoming presidential elections in Iran. Elections are scheduled next month and major power blackouts in cities is wildly criticized by Iranian citizens. However, the Government has blamed the power cuts on cryptocurrency mining and increased electricity demand in summer.
Iran offers cheap power source for mining bitcoins. Tehran allows cryptocurrencies mined in Iran to be used to pay for imports of authorized goods. According to Elliptic, the benefit of cheap power has attracted miners from all over the world, especially from China. Generating the electricity they use requires the equivalent of around 10 million barrels of crude oil per year or 4% of total Iranian oil exports (As of 2020).