Inside Iran’s Onslaught on Bitcoin Mining

Iran is trying to turn crypto mining into a source of income for the state while cracking down on miners.

Iran, hard hit by international sanctions, lost revenue from oil exports. Crypto could be a way to get some extra cash. Therefore, Iran has tightened controls on miners at home in order to better control this source of income. Since last year, Iran has also opened up new opportunities for foreign mining companies.

Iran is a notable player in the bitcoin mining market, contributing nearly 4% to global bitcoin hash power in 2020, according to research by the University of Cambridge.

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However, Iran’s relationship with miners can best be described as complicated.

On the one hand, Iran clearly sees crypto mining as a way to generate income for the state. Iran last year urged miners to register with the country’s Ministry of Industry, Mining and Trade and pay a higher electricity tariff than retail or industrial users.

But Iran has also blamed Bitcoin miners for the recent power outages. As recently as this month, Iranian authorities reportedly closed 1,620 unregistered mining operations and confiscated 45,000 mining equipment.

CoinDesk delves deep into Iranian mining.

Lights out

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Several power outages occurred in Iran in January. The authorities blamed Bitcoin miners for the failures and extensively attacked miners large and small.

Ziya Sadr, Iranian Bitcoin lawyer and blogger, insists that mining has nothing to do with outages and instead blames the government’s mismanagement of power grids. “They shut down miners, but we still have power outages. Guess what? It has nothing to do with the miners! “Sadr told CoinDesk.

According to the Associated Press, however, the miners only use 2% of Iran’s electricity.

The story goes on

However, the Iranian government has also claimed miners have made the country’s electricity grid “unstable” since 2019, Radio Free Europe reported. The publication quoted Iran’s deputy energy minister as saying some mining operations are in “schools and mosques” that receive free electricity.

Iranian journalist Ehsan Norouzi wrote in 2019 that the list of units engaged in mining with free electricity could actually be much larger: the country’s elite armed forces, the Islamic Revolutionary Guard Corps, control a wide network of religious schools, mosques and others Units that receive this will receive electricity for free.

There is no evidence that everyone is mining crypto, Norouzi told CoinDesk over the phone, but “if there is free electricity there will be a market for it,” he said. As early as 2019, the Iranians exchanged photos on social networks of at least one mountain farm in a mosque. The government asked the mullahs to declare fatwas against the theft of electricity.

Chinese investors

Among the victims of the recent blackouts is a mining company that recently opened a large farm in one of the country’s special economic zones.

On January 14, a few days after a nationwide blackout, Iranian authorities temporarily suspended a mining agency in Rafsanjan, Kerman province, citing the excessive load on the electricity grid. According to the new local outlet Mehr News, the data center has been certified by the authorities, but has been taken offline for administration [power] Consumption in the current situation. “

The farm is operated by the Iran and China Investment Development Group. There is no mention of crypto mining on the organization’s website. It is merely pointed out that Iranian and Chinese investors are building a joint 1 million terabyte data center in the Rafsanjan Special Economic Zone. The idea that the Chinese crypto miners were responsible for the power outage quickly spread on Twitter and sparked a certain mood against China, the diplomat reported.

The Chinese investor is a company called RHY, according to Omid Alavi, head of Vira Miners, and Ziya Sadr. Two Iranian miners who wanted to remain anonymous told CoinDesk that RHY’s farm was closed.

RHY has several mining locations, including some in the Middle East, without specifying where. On its website, RHY published a video entitled “175 MW Mine”, which shows several hangars filled with ASICs. A car that can be seen briefly in the video has a Farsi license plate and a flag similar to the Iranian one.

According to the electricity bill translated by The Diplomat, the mountain farm consumed a little less than 60 megawatts of electricity within a month. BBC Persian reported similar capacity for the farm in Rafsanjan.

RHY does not share the company’s contact information on its website, and a customer service chat operator declined to connect CoinDesk with RHY management or a PR representative. The operator also declined to discuss the company’s Iran dealings. A request for comment sent through RHY’s Facebook page went unanswered.

The Rafsanjan farm was closed because, according to Alavi, the electricity tariff has risen sharply after Iran introduced the new rules for miners.

“The Chinese came two years ago and were looking for cheap electricity,” Alavi said. “They found a place in Kerman and started building a large farm. At that time, the Iranian government had no regulation in crypto, and they did [the Chinese company] used the industrial tariff. After a year, the government started regulating and changing the tariff so the company had to pay new bills. “

An Iranian telegram channel addressing miners’ problems with authorities mentioned the story in a Jan. 14 post, stating that “any foreign investor will run away after seeing the treatment of the Chinese investor in Rafsanjan.”

The station also released a letter from Mohammad Hassan Ranjbar, Chairman of the Board of Directors of the Iran-China Investment Development Group. According to Ranjbar, the mining farm in Rafsanjan paid 4,000 rials per kilowatt, which is a high price.

“China is currently the only country that can invest in Iran due to sanctions,” said Ranjbar in this statement, also cited by Aljazeera. “It’s rich and has technology so we can help each other invest and build more projects. But we can also send them away from Iran and become completely isolated and alone in the world. “

Foreign guests

RHY wasn’t the only Chinese mining company in Iran – a number of firms have been operating in the country for several years. In August 2019, miner Liu Feng told Chinese crypto media company 8btc that he had relocated 3,000 of its ASICs to Iran to use the country’s cheap electricity, $ 0.006 per kilowatt hour.

In August 2020, the Chinese mining pool Lubian 8btc also reported on the construction of a mining farm in Iran. Lubian entered the Bitcoin hashrate competition last spring, right after Bitcoin’s last halving, and immediately became one of the leading mining pools.

Speaking to 8btc, Lubian co-founder Liu Ping said the mining pool had established a good relationship with the Iranian authorities.

“We have our own customs clearance channels because we have the experience to set up the logistics company. We have good local resources in Iran and good relations with the Ministry of Energy, the Ministry of Foreign Affairs and even the Iranian Army, ”he said.

It’s not just Chinese miners tapping the Iranian energy market: in April 2020, Turkish mining company iMiner reportedly received a license for a 6,000 ASIC farm in the city of Semnan.

Dmytro Ziablov, CEO of Ukrainian mining company BeeMiner, told CoinDesk the company operates a 2-megawatt mining facility in Iran and plans to expand to 70 megawatts later this year. BeeMiner has received hosting requests from Chinese companies including Huobi Pool. Ziablov said, “The Chinese government does not get so kind to the miners from time to time [miners are] interested in finding new places for me. ”

In addition to the Chinese miners, Turkish and UAE companies are also coming to Iran, Ziablov said. When asked if it was difficult to license the farm in Iran, he said the process took 2.5 months. “It’s hard, but with some perseverance, connections and resources, it can be done,” he added. He said he did not know why the Rafsanjan Chinese farm had to be closed.

Domestic challenges

Meanwhile, the situation for small domestic miners has been difficult in recent years, according to a longtime miner who spoke anonymously to CoinDesk.

Basir (not his real name) told CoinDesk he started mining seven years ago, but authorities took note of it three years ago. In May 2018, police came to Basir’s house, he said, telling him they suspected he owned an unlicensed gun. Then they saw the ASICs. At first the police thought the machines were “a spy server”, but then the cyber police found out what they were dealing with.

According to him, Basir spent a week in jail, charged with illegal income and money laundering, and bailed out on bail that essentially destroyed his family’s assets. CoinDesk was unable to independently verify the details of Basir’s account.

“I sold the house, I sold the car, I sold the graphics cards [that were in my] Stock at low prices, gold and savings. Everything was destroyed, ”he said. “My luxury life turned into a poor life.”

Last year, the Iranian government issued a directive that all mining facilities in Iran must register with the government. Owners must disclose their identity, the size of their farms, and the ASICs they use. The government has also raised the electricity tariff from 482 rials to 1,930 for kilowatts per hour (in US dollars from 0.1 cents to 4.6 cents).

According to the Ministry of Energy, there are currently 24 officially registered mining operations in Iran that consume 310 megawatts of electricity.

Miners are also required to register their mining equipment and if they have been smuggled into the country they will have to pay customs duties if they are not paid on time, Sadr said. Until recently, there was simply no legal process to import ASICs into Iran, he added.

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