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What just happened? Multiple cities in Iran have been facing unplanned power blackouts recently, which according to President Hassan Rouhani, occurred due to a drought affecting the country's hydroelectric power generation. To close the gap between energy supply and demand that usually widens during the summer season, all registered (and unregistered) cryptocurrency mining operations in the country have been banned until 22nd September 2021.
Among several controversies surrounding cryptocurrency mining is the issue of energy consumption and its environmental impact. We recently saw New York looking to put a 3-year ban on mining crypto, but the problem seems much more serious for Iran. The nation has now issued a 4-month ban on this activity after several major cities faced repeated power blackouts.
The combination of scorching summer heat, drought, and demand for greater cooling has put Iran's hydroelectric generation under stress, which the country is now looking to curb with a temporary ban on power-hungry cryptomining rigs.
Blockchain analytics firm Elliptic estimates that around 4.5 percent of all Bitcoin mining takes place in Iran, allowing it to boost its US-sanctioned economy with crypto assets and yielding up to $1bn in annual revenue. The country officially recognizes cryptomining and has a licensing regime in place that allows miners to pay higher tariffs for electricity and sell their mined bitcoins to Iran's Central Bank.
Iranian authorities reportedly confiscated around 45,000 illegal ASIC machines in January this year
However, an 85 percent majority is still unlicensed, according to President Hassan Rouhani, which he said was using between six and seven times more power than licensed facilities, consuming up to 2,000MW of energy each day compared to 300MW used by legal operations. "Now everybody has a few miners laying around and are producing Bitcoins," he jokingly said in a televised cabinet meeting.
Critics have dismissed cryptomining as the main driver of these power cuts, noting that it consumes less than one percent of Iran's total power output, according to an internal investigation by lawmakers. Instead, they point to the country's aging power infrastructure and lack of funding to be the cause behind the outages.