Bitcoin blackouts: Iran blames 'illegal' cryptocurrency mining for city darkness

Iran’s state-owned electricity firm Tavanir announced earlier this week that it had shut down a Chinese-Iranian-run cybercurrency centre in the southeastern province of Kerman due to immense energy consumption – a reported 175 megatwatt hours, enough to power a home for 17 years.

Parts of the Tabriz, Mashhad, and the capital Tehran have experienced persistent blackouts in the past several weeks.

The cybercurrency centre had been licenced and regulated by the Iranian government, however concerns over its staggering energy consumption have forced the closure of the centre, which like other cryptocurrency farms, uses a large collection of computers to verify digital transactions and produce cryptocurrencies, of which the most popular type is bitcoin.

Mostafa Rajabi Mashhadi, a spokesperson for the electricity industry at Iran’s energy ministry to the IRNA, also blamed illegal cryptocurrency miners for straining the country’s electricity grid.

On Wednesday President Hassan Rouhani’s spokesperson confirmed that the government will be investigating unlicensed cryptocurrency farms.

The bitcoin industry in Iran rejected the government’s blame.

Twitter Post

"The miners have nothing to do with the blackouts," Ziya Sadr, a cryptocurrency researcher in Tehran, told The Washington Post.

"Mining is a very small percentage of the overall electricity capacity in Iran."

"It is a known fact that the mismanagement and the very terrible situation of the electricity grid in Iran and the outdated equipment of power plants in Iran can’t support the grid," he said.

A taste for Bitcoin

Cryptocurrency production has spiked in Iran over the last year; in 2020 Iran was responsible for eight per cent of the world’s Bitcoin production.

However Iran’s electricity grids are struggling with the spike and the government is offering $4,750 reward money for tips on illegal crypto-mining locations.

According to data provided by Morningstar for Currency and Coinbase for Cryptocurrency, one Bitcoin is currently worth 1,561,080,769 Iranian Rial (US$37,076).

The appeal of Bitcoin in Iran is that it allows trading outside the traditional banking system, which allows the country to work around US economic sanctions.

In November 2018, the US sanctioned two Iranians and sought to prosecute two others for the "SamSam" cyberattacks on US servers at schools, ports, hospitals and other institutions, when they demanded Bitcoin as ransom.