Iranian authorities are stepping up efforts to combat illegal cryptocurrency mining, blaming it for exacerbating the country’s ongoing power crisis.
The crackdown comes as Iran faces the most intense heatwave in five decades, leading to widespread power outages that have severely impacted industrial production.
Mostafa Rajabi Mashhadi, CEO of Iran’s state electricity company, Tavanir, said that unauthorized crypto mining has placed massive additional strain on the already overburdened power grid. He added the detrimental impact this has had on the nation’s electricity supply, stating that opportunistic individuals have been exploiting subsidized electricity and public networks to mine cryptocurrencies without proper authorization.
“This unauthorized mining has led to an abnormal surge in electricity consumption, causing significant disruptions and problems within the country’s power grid,” Mashhadi said, according to the Iran International publication.
In response, Iranian officials introduced a bounty program to encourage citizens to report illegal mining operations. Mashhadi explained that a reward of one million toman (nearly $20) will be given to individuals who report unauthorized cryptocurrency mining equipment.
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To date, authorities have seized over 230,000 illegal mining devices, which collectively consumed as much electricity as the entire Markazi Province. The crackdown comes amid reports suggesting that well-connected networks and foreign entities, including Chinese companies, may be behind large-scale mining operations.
Interestingly, many of these unauthorized crypto mining units were reportedly discovered in public locations, such as schools and mosques, that receive free or heavily-subsidized electricity.
Earlier in 2023, the Iranian government ordered licensed cryptocurrency miners to temporarily shut shop due the extreme summer taking a toll on the country’s power grid during the hot months.
Nevertheless, the state electricity company warned that illegal cryptocurrency mining in Iran accounts for nearly 85% of the industry’s consumption. As such, officials regularly accuse unlicensed operators of using vast amounts of electricity, draining more than 2GW each day and causing 20 percent of power blackouts nationwide.
According to industry estimates, around five percent of global BTC mining is taking place in the Islamic Republic. The flourishing industry allowed Iran it to earn hundreds of millions of dollars from selling cryptocurrencies, which were used to mitigate the impact of Western sanctions.
While crypto miners are getting pushed out of many countries, the power-hungry industry in the Islamic Republic got the green light to legally operate. Iran was among the first countries in the world to recognize cryptocurrency mining in 2019. Since then, the country has established a licensing regime that requires miners to have a licence, identify themselves, pay a higher tariff for electricity, and to sell their mined bitcoins to the government.
Although mining bitcoin was less profitable again, recently the business has become more expensive due to a bidding war for mining equipment. Bitcoin mining is a very competitive industry as miners worldwide are verifying transactions while securing the network for economic incentives.
