DUBAI, United Arab Emirates – The Iranian government announced a ban on mining Bitcoin and other cryptocurrencies, the country’s president Hassan Rouhani announced on Wednesday as officials blamed the energy-intensive process for power outages in a number of Iranian cities.
The ban is effective immediately and will be in place through September 22, Rouhani told state television, the latest sign of a high-profile rejection of the popular digital currency.
Iran’s capital, Tehran, and several other major cities have faced multiple daily power outages in recent months, and officials blame a shortage of natural gas, a prolonged drought that is hampering the country’s hydropower plants – and, increasingly, bitcoin mining.
And much of the energy used in Bitcoin mining comes from illegal miners or those who work without a license, government officials say.
This led to a nationwide crackdown on illegal bitcoin miners, as well as temporary power outages at legal bitcoin farms as electricity demand rises due to increased consumption from orders for coronavirus that stay at home. With soaring temperatures in the country, electricity consumption has been so high in recent weeks that some medical facilities have struggled to operate their cold stores for Covid-19 vaccines.
In January, Iranian police seized nearly 50,000 bitcoin mining machines that were using illegally subsidized electricity. According to the state-owned Iranian utility company Tavanir, the miners had consumed 95 megawatts per hour at cheap state-subsidized prices.
The Iranian government says that 85% of bitcoin mining in the country is illegal. The country of 82 million people is home to 50 licensed mining operations that consume a total of 209 megawatts of electricity, Tanavir said on Wednesday.
The cryptocurrency, which hit record prices of over $ 63,000 per coin in April, has recently come under fire because of the energy intensity of its production and the resulting environmental costs.
Bitcoin miners use specially designed computers to solve complex mathematical equations that effectively make a Bitcoin transaction possible. The miners are rewarded for their efforts in the digital currency.
However, the whole process is incredibly energy intensive due to the power consumption of the computers.
Iran among the top 10 Bitcoin mining countries
Tehran allows cryptocurrencies mined in Iran to pay for the import of goods, which can help circumvent the far-reaching US sanctions that the Trump administration imposed on the country. The Iranian central bank bans trading in cryptocurrencies mined abroad, although according to the Iranians living in the country these can be found on the black market.
According to Elliptic, a blockchain analytics company, around 4.5% of all bitcoin mining worldwide took place in Iran between January and April this year. This made it one of the top 10 in the world, while China took first place with almost 70%.
China announced its own ban on finance and payments companies in mid-May from offering services for crypto transactions that fueled Bitcoin and several other digital currencies. In April, the Turkish central bank banned the use of cryptocurrencies and crypto assets, citing transaction risks.
The move out of Iran and China comes after a bombshell decision by Elon Musk, CEO of Tesla, to suspend approval of the company’s vehicle purchases in Bitcoin, citing climate change concerns. The price of the coin fell 10% and fell far further after China’s ban. It fell to $ 30,000 before some losses were reduced.
Bitcoin jumped Monday and approached $ 40,000 after Musk said he had “potentially promising talks” with North American bitcoin miners to make the process greener. The digital currency traded at $ 38,800 at 2:25 p.m. CET on Wednesday, up around 4% from the previous day.