Iran Recognizes Bitcoin And Crypto As An Official Industry, Says MP (#GotBitcoin?)
The Iranian government’s Economic Commission has approved a mechanism of cryptocurrency mining in the country, according to an announcement by the Iran Chamber of Commerce, Industries, Mines and Agriculture on July 22. Iran Recognizes Bitcoin And Crypto As An Official Industry, Says MP (#GotBitcoin?)
Iran’s Economic Commission approves crypto mining ‘mechanism’
Governor of the Central Bank of Iran (CBI), Abdolnaser Hemmati said that “a mechanism to mine digital coins was approved by the government’s economic commission and will later be put to discussion at a Cabinet meeting.”
Initially, Iranian authorities announced that they are planning to authorize Bitcoin and cryptocurrency mining earlier in July, when the CBI governor Abdol Hemmati reportedly claimed that the Iranian government had approved some parts of an executive law that would authorize mining of cryptocurrencies in Iran.
At the time, Hemmati argued that digital currency miners in Iran should contribute to the country’s economy, rather than letting mined Bitcoin (BTC) escape abroad.
Also, at the Commission’s latest meeting, its head Elyas Hazrati said that cryptocurrency is now recognized as official by the government, adding:
“We do believe that cryptocurrency industry should be recognized as an official industry in Iran to let the country take advantage of its tax and customs revenues.”
Crypto mining industry taking shape in Iran
Today’s news also follows the finalizing of a tariff scheme for cryptocurrency miners by the Commission on July 21. Energy Minister Homayoon Ha’eri did not specify the exact price scheme, but stated that the price is dependent on market factors such as fuel prices in the Persian Gulf.
Also yesterday, Deputy President of the Islamic Republic of Iran Customs Administration (IRICA) Jamal Arounaghi announced that the agency has not yet issued licenses for the import of cryptocurrency mining equipment. The minister said that if the government authorizes import of crypto miners, IRICA will develop related directives.
In contrast, an Indian government panel recommended today to ban cryptocurrencies and impose sanctions for any dealings involving crypto assets in the country.
Iran Finalizes Electricity Pricing Scheme for Cryptocurrency Miners
The Iranian Economic Commission has reportedly finalized a tariff scheme for cryptocurrency miners, according to a July 21 report from Iranian economic daily Financial Tribune.
Per the report, Energy Minister Homayoon Ha’eri announced that, while the tariff scheme has been finalized, it is awaiting approval from the Cabinet of Iran — a governmental body consisting of various ministers and other officials chosen by the president.
While Ha’eri did not elaborate on the exact price scheme, he stated that the price is dependent on market factors such as fuel prices in the Persian Gulf.
The head of Iran Electrical Industry Syndicate, Ali Bakhshi, previously proposed a price of $0.07 per kilowatt hour for cryptocurrency miners. Electricity in Iran is currently very cheap due to government subsidies; one kilowatt hour of electricity currently costs $0.05, with power being cheaper in the agricultural and industrial sectors.
To put these prices in context, Mostafa Rajabi Mashhadi, the Energy Ministry spokesman for the power department, previously stated that the production of a single Bitcoin (BTC) uses about $1,400 in state subsidies.
The Financial Tribune reports that mining one Bitcoin reportedly consumes as much electricity as 24 buildings in Tehran do in one year.
Today’s news follows an announcement from the Central Bank of Iran (CBI), in which the banks governor Abdol Hemmati claimed that the CBI was planning to authorize cryptocurrency mining.
Similar to today’s statements from Energy Minister Ha’eri, Hemmati said that a planned law will require crypto mining in Iran to abide with the price of electricity for export, rather than allowing miners to use the heavily subsidized internal energy grid.
Also today, Deputy President of the Islamic Republic of Iran Customs Administration Jamal Arounaghi announced that the agency has not yet issued licenses for the import of cryptocurrency mining equipment. While a tariff scheme exists, the final decision on licensure awaits approval from the government.
Iran’s Cabinet Ratifies Bill Recognizing Cryptocurrencies and Mining
Iran’s government is close to passing a bill that finalizes regulation for cryptocurrencies.
As reported by local news source PressTV, the country’s cabinet ratified the bill on Sunday, approving legislation that will formally create a new industry of cryptocurrency mining, as was expected.
Mining will be allowed inside Iran as long as participant adhere to conditions listed in the bill, including obtaining industry ministry approval. Mining centres must also not be sited within a 30-kilometer (approximately 19-mile) range of all towns except the capital Tehran and major city of Esfahan where tougher restrictions will be applied, the report says.
Regarding devices used for mining, crypto miners must observe rules laid out by Iran’s standardization and communications authorities.
Mining firms also face fees on the energy used as part of the mining process, and will be charged for electricity, or natural gas that can be used to generate electricity, at the same prices as energy exports from the country, the bill reportedly says.
Miners will be taxed at the same level as industrial manufacturing firms, with exemptions for firms exporting mined cryptocurrencies and returning the revenue back to Iran’s economy.
The bill also notably lifts the illegal status of cryptocurrencies in Iran, although it stresses that trades made with cryptocurrencies in the nation are not recognized as lawful.
Further, cryptos will not be recognized as legal tender and the Iranian central bank will not guarantee their value.
The move has been prompted by Iran’s increasing popularity with crypto miners due to its cheap power. The country is also reportedly eyeing the use of cryptocurrencies as a means to circumvent international sanctions.
Iran Considers New System of Annual Registration For Crypto Miners
Iran’s cabinet is looking into a proposal to register cryptocurrency miners on a year-to-year basis.
According to documents reported by Coindesk on Sept. 19, a draft proposal to register crypto mining operations is currently on its way to official approval in Tehran. The proposed licenses would require information on employment, rent agreements and other business activities.
The requirements seem designed to allow the Iranian government to curtail unsavory activities related to crypto while continuing to profit from an industry thriving in a country facing international sanctions and inflation — economic factors that have resulted in a rise in national misery.
Status Of Crypto In Iran
Recent months have seen a great deal of hubbub surrounding the Iranian government’s attitude towards cryptocurrency within its borders.
In June, Iran’s Ministry of Energy said that they would be cutting off power to mining operations using the country’s subsidized energy grid until special pricing went into effect. A month later, that special pricing was finalized, with miners expected to pay $0.07 per kilowatt-hour, compared to $0.05 for most citizens.
Subsequently, at the end of July, Iran authorized mining as an industrial activity. And while the Iranian cabinet rejected the use of cryptocurrencies in transactions at the beginning of August, Iran’s National Tax Administration did agree to exempt repatriated crypto mining earnings from taxation last week.
Iranian Bitcoiners Risk Fines, Jail Time As Government Regulates Mining
The Iranian government has been cracking down on cryptocurrency mining operations over the past three months, pending new legislation for formal mining licenses.
Since authorities have not officially approved a mining license process, several sources told CoinDesk that bitcoin miners are now operating in a climate of perpetual fear.
In rare cases, they can be jailed for continuing to operate. More often, they face exorbitant fines or have their equipment sealed off.
“If the government learns about my equipment, they’ll seal it and turn it off,” one small-scale bitcoin miner, operating just 15 machines in Tehran, told CoinDesk, adding:
“I’d be arrested. … After six months of waiting [for licensing regulations], they still want to make miners seem like criminals.”
Another professional bitcoin miner estimated the government has confiscated 80,000 mining devices over the past four months. It’s hard to say what the real numbers are, since they are not publicized. But this second bitcoiner alone lost access to thousands of machines, as he was operating an industrial farm connected directly to a power plant. He said 30 households lost their income when the government shut down his operation.
Plus, he says he personally knows more than 15 bitcoiners who were jailed.
“We have to wait for the Ministry of Energy, and the [new] regulations, to make a protocol with tariffs for our business,” he said.
An anonymous bitcoin developer in Tehran, who often works with miners, told CoinDesk many bitcoiners surrender the deeds to their homes to get out of jail, because the fines themselves can be worth more than their annual salaries. He said the fines range from $2,000-5,000 per machine, which is several times their retail value.
“There are also fines on the price for electricity,” he added, explaining that the electricity fines are often four times the annual cost of power for the machines. For example, if the mining farm paid $5,000 for a whole year of electricity, the fine for using a subsidized electricity source could be $20,000.
In Iran, the state-controlled electricity prices vary according to use-cases and the category for bitcoin mining has yet to be formally established.
As for the second miner who lost access to his industrial-sized operation, he told CoinDesk his company has an “open case” in court over a fine. He expected to be charged twice the market value for thousands of machines. But he’s unsure how he will be able to pay.
These bitcoin miners face compliance hurdles from multiple agencies, related to both smuggled equipment and subsidized electricity fees.
The anonymous developer said most computer equipment and luxury goods are technically smuggled, from air conditioners to televisions sets. He said foreign grey market products are usually cheaper and higher quality than those sold through official retailers.
“If [the government] really wanted to fine all the people in the country using or selling smuggled merchandise, they’d have to fine everyone in this country,” he said, adding:
“Yet in just one area in the southern part of Tehran, a dozen [mining] farms were [recently] closed.”
As reported by a Tehran-based journalist for Bitcoin Magazine, the acute focus on fining bitcoin miners is wreaking havoc on the Iranian crypto community.
A survey of 600 Iranian bitcoiners, conducted over the past two weeks by the market research firm Gate Trade, found that 40 percent of respondents said the lack of regulatory clarity was their “biggest challenge related to bitcoin.”
Another miner operating near Tehran, also tapping into an industrial power plant, said up to at least 30 people associated with his farm haven’t had income for over a month. Plus, he said people with smaller, personal miners are afraid to move their equipment these days.
“If you were caught by the police having mining equipment in your car, your equipment would be seized and you would be charged with a penalty for handling or moving illegally imported machines,” the third miner said.
Indeed, local news outlet Fars News reported in July that several unnamed individuals were arrested in the southwestern city of Saveh for transporting smuggled mining equipment.
Given this context, the growth of Iran’s bitcoin mining sector is screeching to a halt, with some bitcoiners taking small operations deeper into the proverbial underground and others halting completely.
Just like the second miner, the third mining farm operator’s machines are now sealed under government control, as he too has a pending court case.
Both this third miner and the developer said there is no evidence to suggest the government is mining bitcoin with confiscated equipment, and they hope it will remain that way.
To be fair, the third miner also said many people steal electricity for bitcoin mining, though he said his operation had a contract with a power plant. He personally doesn’t know anyone who went to jail over the summer. Most of his associates either lost access to their equipment or had to stop working.
“All we want, as people living in Iran, is for our government to understand the importance of this opportunity,” the third miner said, speaking to the hope that Iran will become a hub for bitcoin mining operations.
The second miner agreed. Imagining a worst-case scenario, he added:
“Otherwise, we’d have to sell [our equipment] like garbage.”
Iranian Authorities Have Issued 1,000 Licenses For Cryptocurrency Mining
Iran’s Ministry of Industries, Mining and Trade has issued over 1,000 cryptocurrency mining licenses to domestic operations.
According to a report published on Jan. 24 by Iran’s Banking and Economic System Reference Media (IBENA), a member of the Information and Communications Technology (ICT) Guild Organization’s blockchain commission, Amir Hossein Saeedi Nai, informed the public of the number of licenses issued.
He explained that before launching a mining operation in the country, entrepreneurs must apply for a license, adding that the government has issued over 1,000 permits so far, and several mining farms have already launched operations. Nai estimated that, if the local mining industry were to function at full capacity, it would bring $8.5 billion into the local economy.
Mining’s Role In Iran’s Economy
Banking sanctions from the United States and other western countries have hit Iran’s economy hard. Nai said that the country is in need of foreign exchange volumes, and that digital currency can help facilitate trade while importing foreign currency as well as be used to skirt economic sanctions.
The official explained that the ICT Guild Organization is currently working to improve Iran’s cryptocurrency mining conditions. The hope is that local mining activity will see a renaissance through changing electricity rates and boosting cooperation between local cryptocurrency miners and gas-burning power plants.
Iran has some of the lowest energy prices in the world at $0.007 per kilowatt-hour. However, recent energy shortages and blackouts have led regulators to take a more active role in managing the country’s power supplies and therefore, take a strict approach to cryptocurrency mining.
The rise of cryptocurrency mining in Iran led the government to raise its electricity tariffs for the sector significantly from the aforementioned $0.007 to $0.07 per hour — the same price as electricity exports.
In August 2019, Iranian police arrested an individual smuggling in unregistered cryptocurrency mining machines. As Cointelegraph reported the following November, the country’s authorities went so far as to offer a bounty to anyone who exposes unauthorized mining operations in the country.
Iran’s President Asks Gov’t To Plan National Crypto Mining Strategy
Iran’s president has tasked officials at the central bank and ministries of energy, communications and IT with drafting plans for a national cryptocurrency mining strategy.
Iran’s president has tasked officials at the central bank and ministries of energy, communications and IT with drafting plans for a national cryptocurrency mining strategy.
As reported by the Iranian news website ArzDigital on May 22, officials were briefed during the 137th session of Iran’s economic coordination headquarters earlier this week, chaired by President Hassan Rouhani.
The development comes shortly after the Iranian government announced a redenomination policy for the country’s fiat currency, the rial, in a bid to tackle crippling chronic inflation.
Digital Currencies Closely Watched By The Iranian Government
Earlier this week, Iran had also moved to include cryptocurrencies into its foreign currency exchange regulations and anti-currency smuggling enforcement efforts.
This will bring those crypto exchanges licensed by the Central Bank of Iran under the purview of existing regulatory regimes for foreign exchange currencies, amid a period of extreme capital outflows from emerging markets during the global pandemic.
Also this week, Iran’s central bank and domestic exchanges agreed to cooperate on efforts to stabilize the foreign exchange market, including a provision to use digital currencies where necessary to facilitate currency exchanges and return export currency.
The public health crisis, compounded by the persistence of the sanctions regime, has strained an ailing national economy, which had already contracted by 9.5% in 2019 and was faced with a 17.8% youth unemployment rate.
Iran’s Strategic Stance Towards Cryptocurrencies
While further details of Iran’s national cryptocurrency mining strategy are yet to be clarified, Iran had already issued about 1,000 licenses to crypto miners in the country and gave the go-ahead to Turkish crypto mining firm iMiner to establish a 6,000-rig facility in Semnan province earlier this month.
The Iranian government authorized crypto mining as an industrial activity back in July 2019.
Amid a stifled economic climate, a general in the Islamic Revolutionary Guard Corps addressed a crowd earlier this year with calls for the country to make use of cryptocurrencies to circumvent the sanctions regime.
President Rouhani has himself argued in favor of creating an alternative currency, potentially a digital one, to loosen the grip that U.S. sanctions have as the “main tools of domineering hegemony and bullying” of specific nations.
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