Unsurprisingly, Bitcoin and cryptocurrency is used in many countries where the value of the local currency continues to plummet and the citizens need to consider other options for business, especially for cross-border transactions.
It is also being used in other places where the citizens suffer the brunt of heavy regulations and sanctions placed by the government. This is exactly the case in Iran which, according to the Minister for Information and Communications Technology, has become “heaven for miners.”
The minister, Mohammad Javad Azari Jahromi, has confirmed that the government has imposed a temporary ban on the importation of mining equipment into the country. According to him:
“The business of mining is not forbidden in law but the government and the Central Bank has ordered the Customs Bureau to ban the import of [mining machines] until new regulations are introduced.”
Crypto Adoption Rises As Economy Falls
Recently, Iran’s Misery Index – an informal calculation of an economy’s position, was said to have increased by 10% in a short time. This was also not helped by the fact that the U.S. is also biting down on the region with sanctions. Because of this, a lot of the population now earn way less than the country’s poverty line with unemployment also very close to 20%. Furthermore, proceeds from the exportation of oil for Iran have dropped by nearly 90%, sparking discomfort and some protest in the country.
Iran, however, has subsidized power fees to half a cent per kilowatt and the cheap rate has significantly encouraged the countries budding crypto community, increasing mining activity. However, this situation is rapidly been turned over by the government as authorities have begun to swoop in on mining farms. Not only are these raids increasing in number, but they are also being shown on local TV stations in a bid to discourage cryptocurrency mining.
Now, as the minister has pointed out, a blanket ban has been placed on the importation of mining equipment to further discourage miners until regulations are clear. However, Ali Bakhshi, the head of Iran’s Electrical Industry Syndicate, has said that the delineated regulations would most likely see the country’s ministry of energy, increase electricity costs for Bitcoin miners.
For now, the proposed increase is 7 cents per kilowatt as opposed to the current half-a-cent. It might be important to note that while this is a heavy increase in energy rates, it’s still less than half of what’s obtainable in the U.S.
The government, predictably, is worried about crypto because it would seem that citizens are now quickly converting the Iranian Rial to other currencies.
In fact, Mohammad Reza Pour-Ebrahimi, the head of the Iranian parliament’s economic commission, said last year that Iranians have successfully used crypto to channel about $2.5 billion out of the country. In response to this, the country’s central bank then forbade all financial institutions from crypto services. Regardless, Jahromi believes that digital assets are most suitable for smaller transactions. According to him:
“Cybercurrencies are effective in bypassing sanctions when it comes to small transactions, but we do not see any special impact in them as far as mega-transactions are concerned. We cannot use them to go around international monetary mechanisms.”
Religious Clerics are Slowly Coming on Board
Jahromi might in some way, be a bit of a “cryptovangelist” as he and his staff are responsible for convincing some ayatollahs about the applications for Bitcoin.
Iran Continues Crackdown on Mining Activity, Bans Importation of Machines Some clerics have previously described Bitcoin as either problematic or downright “haram” – forbidden. However, Jahromi and his team have successfully convinced them that Bitcoin isn’t terrible. According to him:
“Some of our top clerics have issued fatwas that say Bitcoin is money without a reserve, that it is rejected by Islam and cybercurrencies are haram. When we explain to them this is not a currency but an asset, they change their mind.”
So far, the Iranian police have also seized about 1,000 Bitcoin mining machines from two different farms after it noticed that consumption of electricity had spiked by 7% in June. However, reports say that miners are circumventing the crackdown by using mosques for their mining activities because the government gives the power of the mosques for free.