Bitcoin mining in the hands of Chinese
By Helia A., Iran
It was in 2016 that the price of Bitcoin - unknown in Iran - as the most popular digital currency grew rapidly. The world also knows about digital currency due to the big jump in its price in 2017, but for Iranians, Bitcoin was associated with the presence of the Chinese in this industry in the country, when images of a small Bitcoin mining farm attributed to a mosque in Iran were published on Twitter and public opinion became sensitive to these currencies and the devices associated with them.
Ahmad Mostafavi, an economic journalist, says: "The story of Bitcoin began in Iran in 2017 when digital currency mining was banned in Iran and at the same time the Chinese were trying to extract Bitcoins in Iran because electricity was cheaper in Iran than other countries. There were also reports at the time that these miners were usually built in schools, mosques, and places where electricity was paid for by the government. This led the Central Bank to announce that year that the use of Bitcoin and other virtual currencies was banned in all monetary and financial centers of the country. As a result, dozens of miners from different parts of the country were confiscated and lawsuits were filed against the miners. Finally, in the same year, the plan to build the largest data center in the Middle East in the Rafsanjan Special Zone was launched; a data center that needed to be legislated to get started; In 2018, the Cabinet of Ministers approved the regulations for the extraction of encrypted processing products in the country. According to this decree, the extraction of encrypted digital currency processing products (mining) was allowed with the permission of the Ministry of Industry, Mines and Trade."
Mostafavi added: "According to unofficial statistics, there are currently about 180,000 miners in Iran, of which about 80,000 are in the possession of private and non-governmental individuals and companies, and the rest belong to government institutions, and in all of Iran with a share of 8 percentage is the third largest Bitcoin mining country in the world."
Due to the low cost of electricity in Iran and also the low value of the Rial against the US dollar, it is natural that the willingness of foreign investors to invest in Iran's mining industry is increasing day by day. "Mining digital currencies requires the use of cheap electricity to increase the profit margins for miners," said Behzad Kashfinia, an economic correspondent.
"On the other hand, increase in the global price of digital currencies has led to day by day increase in the number of people who want to make money in this market. Until now, many foreign investors have been interested in mining Bitcoins in Iran, among which Central Asian countries or the Chinese have shown the greatest willingness to invest in Iran, and even now some of these people in Iran are trying to invest, but there is no exact information on how many foreigners are mining Bitcoins in Iran. Of course, it should be added that foreign companies do not work alone in Iran, and it is likely that there are people behind the work who can legislate as desired by the foreign company of the other party, and this is something about which there is no exact information yet."
Regarding the price of electricity, Kashfinia added: "The discussion of cheap electricity led to the approval of instructions by the Ministry of Industry, Mine and Trade, according to which the establishment license is issued while the total power consumption of digital currency extraction equipment of investors is not less than 250 kW and miners smaller than 250 kW is not possible to obtain a legal license. This means that the volume of 250 kWh is a volume that an independent Iranian person can barely handle, and in contrast, it is easy for a foreign company or companies affiliated with specific institutions in Iran. In other words, the Ministry of Industry, Mine and Trade, by including this clause in the instructions, banned any micro-activist from entering the digital currency industry. On the other hand, there was an issue according to which the electricity tariff of the miners was set equal to the export electricity rate (3 times the domestic electricity tariff), but reports indicate that in some areas the miners are still using cheap agricultural and industrial electricity. The Chinese have benefited from a 20% discount on electricity substations in this project. But the raised issue was never rejected or approved by the Ministry of Energy."
Bitcoin mining is indeed very profitable for foreign investors due to the cheapness of electricity, but on the other hand, there is a debate about why Iran is willing to provide its cheap electricity to foreign investors. "US sanctions, the hassle of transferring money via Swift, and problems with oil sales have led Iran to pay special attention to digital currency extraction, or so-called mining," Mostafavi said. "However, all government institutions are trying to obtain a source of income for themselves in any way. Many institutions have power plants that cannot export electricity due to sanctions, so they use it in the mining sector because even if they export this electricity, they cannot receive money for it. So they convert it into Bitcoin and make money from it. It is estimated that if Iran can overcome the necessary obstacles in various areas, including the lack of legislation, Bitcoin mining could generate annual revenue of 5.8 billion$ for the country, which is a significant amount."
This argument comes at a time when many experts believe that digital currency cannot bypass sanctions and is not effective in very large transactions such as the sale of oil and gas. Ali Masihi believes that the total volume of digital money transactions is limited and usually in small amounts. In cases such as oil and gas transactions where the volume of financial transactions is high, this network overload can be traced and it is not possible to bypass the sanctions: "Digital money can be useful in smaller transactions. For example, freelancers can use cryptocurrencies to get paid, factories to pay for raw materials, or users to get some online services. But it is not possible for high-level transactions."