Iran’s Central Banks Acquires Bitcoin Even Though Lagarde Says Central Banks Will Not Hold Bitcoin
The ECB President gives the impression that central banks will avoid copying institutions in hoarding cryptocurrency. Iran’s Central Banks Acquires Bitcoin Even Though Lagarde Says Central Banks Will Not Hold Bitcoin
The head of the European Central Bank (ECB) thinks that central banks worldwide will not be holding Bitcoin (BTC) any time soon.
In a conference call with The Economist on Feb. 10, Christine Lagarde showed herself to be firmly risk-off when it came to decentralized cryptocurrencies.
“Out Of The Question”
“It’s very unlikely — I would say it’s out of the question,” she responded when asked about central bank Bitcoin uptake.
Lagarde has long derided Bitcoin, which has surged at a time when the ECB prints huge amounts of liquidity in an attempt to shore up its financial jurisdiction after a year of government-imposed lockdowns.
The ECB is nonetheless “doing its best” to promote Bitcoin by accident, bestselling author of “The Bitcoin Standard” Saifedean Ammous says.
He referenced another ECB event this week which yielded signs that consumers throughout the Eurozone bloc may be grappling with negative interest rates within years.
Quoted by Bloomberg, one executive board member said that should the the institution create a digital euro, it should charge people who refuse to spend it.
The reason, Fabio Panetta argued, is that should the Eurozone experience another financial crisis, consumers might drain their bank accounts and bank directly with the digital euro’s issuer.
“For example, in times of crisis it could be necessary to adjust the remuneration of the digital currency, but this could signal that the central bank is anticipating financial tensions, leading to self-fulfilling instability,” he added.
Making ‘Em Pay
As such, in order to keep banks afloat, the digital euro, somewhat ironically, should punish those who attempt to avoid to safeguard their financial integrity.
According to Bloomberg, Panetta said that a tax of 2% would be insufficient to halt a bank run, and that the remuneration he spoke of should be “highly penalizing.”
Perhaps unsurprsiingly, his comments drew derision from Bitcoin proponents who have long enjoyed the ability save without paying for the privilege via negative interest rates.
“The ECB really doing its best to emphasize and advertise Bitcoin’s value proposition,” Ammous summarized.
It is not the first time that the central bank has inadvertently advertised the benefits of using a currency not under its control.
As Cointelegraph reported, various officials have unmasked the unattractiveness of the euro as a financial proposition on multiple occasions.
The digital euro is thought to be at least four years away, far behind experiments by China, which is already rolling out its digital yuan.
Iran’s Bitcoin Mining Strategy Is Not Supposed To Appease America Or Americans
Iran’s push to license bitcoin mining could help it evade U.S. sanctions. But the plan is likely to help some of its people more than others.
During a continued divergence in the crypto markets, where ether (ETH, +1.6%) posted new all-time highs while bitcoin wallowed at levels almost $10,000 below its peak, the politics and buzz around both continue to spur thought and debate.
In the spirit of that, this week’s newsletter dives into Iran’s ostensibly pro-bitcoin strategy and shows how it contravenes the level playing field values on which bitcoin is built. It also looks at the explosion in non-fungible token (NFT) sales and offers a lesson from Crypto Twitter on how to deal with rumors.
After you’ve read all that, please find time to listen to this week’s excellent episode of our “Money Reimagined” podcast.
In the latest stop on our world tour of crypto hot spots, Sheila Warren and I talk to two Nigerian entrepreneurs: Yele Bademosi, the CEO of payments app Bundle Africa, and Adia Sowho, a venture builder and operator.
Among this entertaining pair’s many cool insights was the idea the Nigerian Central Bank’s February order that banks shut down crypto companies’ access backfired. It spurred even more innovation, inspiring local developers to dream up new decentralized solutions for getting around the banking sector’s gatekeepers.
Iran Is The Cuba Of The Crypto Age
Be careful what you wish for.
News this week that Iran will allow a small set of qualified entities to pay for imports with cryptocurrency mined by licensed operators might sound like an enlightened move to some bitcoin enthusiasts.
It fits a narrative that when governments start accepting bitcoin, they jump-start its role as a universal reserve asset. Meanwhile, the free trade-minded who chafe at all government intervention in markets may view Iran’s use of bitcoin to get around U.S. sanctions as a positive blow for global commerce generally.
But look closer and you’ll see in Iran’s bitcoin strategy the hallmarks of an authoritarian system that flouts the freedoms crypto advocates like to embrace. When viewed alongside a crackdown against unlicensed crypto mining, the regime’s moves could widen the divide between government-favored elites and average Iranians. (Below we delve into the lessons on this taken from Cuba’s destructive dual-currency system.)
It’s not clear if federal officials in Washington will care about that inequity. But it will view Iran’s bitcoin solution for sanction avoidance with alarm, as it undermines the United States’ self-appointed role as cop to the global financial system.
Concerns about that will be amplified if it’s apparent that China, which is eager to knock the dollar off its international reserve currency perch, is directly or indirectly supporting Iran’s approach. (The pathways for Beijing to do so are already laid.)
The question is: How should the Biden administration respond? Let’s hope it avoids the temptation to roll this into a simplistic “bitcoin bad” narrative and imposes tighter controls on the cryptocurrency’s users in the U.S. and elsewhere.
A more constructive approach would encourage Iran to abandon its strategy for a crypto policy that favors innovation, green infrastructure and economic freedom for all its citizens.
Some miners more equal than others
The intent of the government of President Hassan Rouhani is hardly a mystery.
Even though Iran is a major oil producer, years of crippling U.S. sanctions aimed at containing its nuclear weapons program have deprived its economy of dollars. That makes it very difficult for Iran to buy what it needs from the world, and ensures that the local currency, the rial, is under perpetual downward pressure, which in turn stokes inflation.
Now, by creating a legal framework in which bitcoin can be mined locally, taxed under a strict licensing system and used by regulated institutions to pay for imports, the government has a workaround. Iran will still struggle to sell its energy resources for dollars, but it can do the next best thing: It can convert that same local resource into bitcoin, a harder currency than dollars.
At the same time, the regime is showing its authoritarian instincts. In January, it said that Iran had 24 officially registered mining farms, consuming 310 megawatts of power, and that the Ministry of Energy had shut down 1,620 illegal bitcoin mining operations with a capacity of 250 megawatts over the prior 18 months. It offered rewards of up to 100 million rials ($2,350) for information leading to the arrest of illegal miners.
In a subsequent story by CoinDesk’s Anna Baydakova, one household miner, “Basir” (not his real name), said he spent a week in jail before he could scrounge up the large bail amount by selling his house, his car and his mining equipment.
The premise for the crackdown is that illegal mining is disrupting Iran’s overstretched electricity grid. But bitcoin advocates say that is unfair as the country’s blackouts have continued even after the authorities have done their sweep.
Regardless, by making itself the gatekeeper for domestically mined bitcoin and discriminating over which entities can access it, the government is laying the groundwork for societal divisions – especially if bitcoin grows in importance, as many expect it will.
To understand why, let’s go back to the early years of the post-Cold War era in Cuba, another country that has labored under the constraints of U.S. sanctions.
In 1993, Fidel Castro’s regime was broke. Its longtime benefactor, the Soviet Union, had collapsed and the island economy was reeling from four years of “Special Period” austerity.
Castro reluctantly adopted a radical solution: He legalized the use of U.S. dollars, but only within designated, closely regulated industries such as government-sanctioned tourism resorts that could only accept foreigners as guests.
It later entrenched this system by requiring all incoming foreign currency, including that carried by foreign tourists, be exchanged into “convertible pesos,” a new local currency pegged one-to-one with the dollar.
The new notes would circulate in parallel with the traditional Cuban peso, known as “moneda nacional” (national currency), but could only be used in those same sanctioned settings.
The strategy gave the regime a lifeline. With taxes from regulated foreign currency inflows, it continued to defy the Helms-Burton Act.
But the system created two Cubas, one where a privileged elite got access to goods and services available only in de facto foreign currency. Everyone else earned near-worthless moneda nacional, which could buy only items listed on the “libreta,” or ration book, an artifact of Soviet communism that guaranteed necessities such as bread and milk but excluded anything deemed to be a “luxury” – in effect, anything imported. To give you an idea of how limiting the libreta was, it did not include the “luxury” of tampons.
These deep divisions also bred rampant corruption because goods designated for the moneda nacional economy were hoarded and sold illegally in the convertible peso economy.
Bakers would secretly deliver half their production to fancy foreign tourist-only restaurants, denying libreta holders their bread rations. Gas stations would siphon off gasoline intended for domestic customers and deliver it to companies operating in the convertible peso economy. Painters would thin out their paint so that they could sell half their supplies to hotels.
The human effect of this stood out to me when I visited Cuba for book research in 2008. One day, I hired a rickshaw driver with my convertible pesos. Every time he saw a policeman up ahead, he urged me to dismount and walk to meet him two blocks down the road because he couldn’t be seen to be servicing dollar-wielding foreign tourists.
The system created a new class of predominantly white elites whose expat families in Miami and Madrid would send them foreign currency, while doing nothing for a disproportionately black community without such ties.
By the standards of Communist Cuba’s professed egalitarian ideals, it was an abomination. Yet, it took the government 28 years – until January of this year – to unify the currencies. Such was the intoxicating appeal of this unjust system for the Castro dictatorship – first under Fidel, then under his brother, Raul.
A Different Path?
Similar inequity lies ahead for Iran if it sticks with its crypto strategy and, as many of us believe, bitcoin becomes a sought-after store of value in a post-COVID era of high debt, slow growth and fiat currency depreciation. Some Iranians will become phenomenally rich. Others will be stuck with worthless rials. Attempts to cross the divide will encourage corruption and social tensions.
Still, for the Iranian regime, the strategy is a tempting way to fund itself. Also, given Iran’s relationship with China – with which it recently struck a $400 billion, 25-year investment deal that included access to Iranian oil and a plan for a binational “bank” – it presents an opportunity to shift the geopolitical landscape.
China has the largest bitcoin mining industry in the world, and so it’s not hard to imagine Chinese bitcoin miners building officially endorsed, fossil fuel-run facilities inside Iran. Once bilateral payment agreements are in place to use digital currencies that bypass the U.S.-led global financial system, one can foresee a feedback loop in which China gets oil, Iran gets hard currency, the dollar’s power is diminished, and bitcoin’s carbon footprint grows.
How Should The U.S. Respond?
My fear is the rallying cry in Congress will be that bitcoin is “enabling” reprehensible sanctions-busting behavior, prompting calls for tougher crypto regulations. That will only drive more activity underground and encourage more dirty fuel installations in Iran and elsewhere – in effect, strengthening the regime’s hand.
The alternative is the U.S. government takes a more constructive approach, encouraging innovation and economic freedom. It could offer to work with domestic bitcoin miners to commit to zero greenhouse emissions and, in so doing, develop such energy sources, whether it’s the government’s nuclear plants or locally run solar and wind operations.
As I wrote in a prior newsletter, I see a pathway for government incentives to make bitcoin mining a catalyst for green energy development. Iran, as an energy powerhouse, is well placed to work with U.S. scientists on such solutions.
One can hope, right?
Iran May Reap Upwards Of $1 Billion In Annual Bitcoin Mining Revenues
The country uses the digital currency to pay for imports and circumvent oil sanctions.
While Iran’s regulatory relationship with Bitcoin runs hot and cold, a new report from blockchain analytics firm Elliptic indicates that regulated mining activities may be driving upwards of $1 billion in revenues and helping the country evade economic sanctions imposed by the United States.
An excerpt of the report published today points to research indicating that Iran currently accounts for 4.5% of total global Bitcoin mining operations, earning the state hundreds of billions which have been used to circumvent the oil embargo in particular.
“The US imposes an almost total economic embargo on Iran, including a ban on all Iranian imports and sanctions on Iranian financial institutions,” reads the report. “Oil exports have plummeted 70% over the past decade, leaving the country in a deep recession with soaring unemployment and periods of civil unrest.”
“In the face of these sanctions, Iran has turned to an unlikely solution – Bitcoin mining.”
The report notes that cheap, abundant oil means that energy-intensive mining operations are comparatively inexpensive for Iran. As such, foreign investors, especially from China, are playing a key role in the country’s expanding crypto economy — sometimes with the assistance of the Iranian military.
“Several Chinese businesses have been granted mining licenses and have established operations in the country. These companies have described establishing good relationships with ‘the army in Iran’, and one particularly large facility in the Rafsanjan Special Economic Zone was reportedly built in collaboration with a ‘military organization’,” the report says.
Ultimately, these state-sanctioned mines produce Bitcoin which can then be used to help the country sell its oil by proxy: excess energy and oil is used to produce Bitcoin, which can then be sold on global markets.
The report also notes that this dynamic “has become all but an official policy.” In late April Iran passed laws that will enable banking entities to purchase imports with cryptocurrencies, and then in May the government appeared to try and strengthen its grip on crypto with a law banning the use of foreign-mined BTC for imports.
Despite now appearing to function as a key part of Iran’s global trade strategy, the official relationship with Bitcoin hasn’t always been so rosy. In January officials tried to place the blame for endemic power outages on illegal mining operations (though experts said that a decrepit power grid was the more likely culprit), and earlier this morning reports emerged that the country is using its intelligence agency to hunt down illegal farms.
Iranian Intelligence Officers Target Illegal Cryptocurrency Miners
Iran has reportedly enlisted the help of intelligence officials to track down illegal cryptocurrency mining farms.
The Iranian government is using intelligence officers to find and stop large-scale farms that have been set up to mine cryptocurrencies like Bitcoin (BTC), Bloomberg reported on Friday.
The Iranian Students’ News Agency reported the testimony of a distribution coordinator at a state-run grid operator, who said the Ministry of Intelligence had begun setting up committees across the country to find and seize crypto mining farms.
Iran recently increased its efforts to curb the illicit mining of cryptocurrencies after the nation’s electricity grids began to falter under heavy consumption. The state-run energy grid operator, Tavanir, was forced to restrict power to certain parts of the country due to increased energy usage by miners, resulting in power cuts, and the dimming of street lights.
It’s not just large-scale efforts that Iranian officials are eager to stop. A spokesperson from the country’s Ministry of Energy recently reminded citizens that mining crypto at home was also illegal and that anyone caught doing so would face heavy fines if caught.
Cryptocurrency mining is considered a legitimate industrial activity in Iran. It is subject to licensing, and the pricing of electricity used in the process is regulated by the government. A spokesperson for Iran’s Ministry of Energy, Mostafa Rajabi, stated that as much as 87% of cryptocurrency mining in Iran was considered illegal.
One fruitful source of information for the government on the operation of mining farms is reportedly local whistleblowers, who are incentivized with cash rewards to notify authorities of illegal activity. This year, the national grid operator doubled the maximum reward for successful tip-offs, raising it to 200 million rials ($873) — more than four times the median monthly salary in the country.
Drought And Crypto Mining Fuel Iran’s Business-Choking Blackouts
Dry weather, a drop in electricity generation and a surge in illegal cryptocurrency mining are playing havoc with Iran’s power grid.
Iran’s power minister, Reza Ardakanian, said a one million increase in the number of new users since last year — due to in increase in manufacturing facilities as well as cryptocurrency mining — had sent daily consumption soaring compared to last year, with only 16% of the added volume attributable to licensed, legal miners, the Iranian Labour News Agency reported on Tuesday.
Officials have also blamed unusually low rainfall and the early onset of a particularly hot summer for a substantial drop in water levels at dams, knocking supply from hydroelectricity plants by about half since March 20, according to figures published by Iran’s state-run grid operator, known as Tavanir.
The government’s been cracking down on illegal cryptocurrency miners in an effort to relieve pressure on the power grid. Mohammadhassan Motevallizadeh, the chief executive of Tavanir, has said staffers have even been shot at while trying to access suspected illegal mining facilities, the semi-official KhabarOnline quoted him as saying.
The blackouts follow an unprecedented round of winter outages in January that officials also blamed partly on cryptocurrency mining and a shortage in natural gas supplies.
The crisis comes as Iran is trying to negotiate the revival of its 2015 nuclear deal with world powers and the removal of thousands of U.S. sanctions that have severely hampered the country’s ability to attract much-needed investment in its civilian infrastructure.
Blackouts in arid summer weather are common in Iran. But residents in the Middle East’s second-largest capital city say it’s never been this bad.
“The shortest outage I’ve had so far is three hours and I’ve had two a day for three days,” said Nazanin, finance manager at a small marketing company in Tehran that depends on online operations.
Tavanir reported record levels of electricity consumption in Tehran over the past week, the semi-official Iranian Students’ News Agency said. It’s affected the ability of some healthcare centers to maintain cold-storage facilities for the coronavirus vaccine, lawmaker Mohammadali Mohseni Bandpayi told ISNA on Monday.
The Health Ministry denied hospitals have been affected.
Proposed Bill In Iran Could Ban All Foreign-Mined Cryptocurrencies
Lawmakers seem to be attempting to establish a legal framework behind a Central Bank of Iran decision for people to only use crypto from state-licensed mining operations for payments.
A new bill drafted by the Iranian Parliament Commission on Economy aims to restrict the use of cryptocurrencies within the country while providing a clearer legal framework for miners.
According to a Friday report from the Tasnim News Agency, lawmakers drafted a bill titled “Support for cryptocurrency mining and organizing the domestic market for exchanges,” which the country’s parliament first announced on June 23. If passed, the legislation would make Iran’s central bank the regulatory authority for the exchange of cryptocurrencies in the country.
Under the bill, all cryptocurrencies could be prohibited within Iran for payments except for a “national” one — purportedly a central bank digital currency or tokens minted in the private sector.
However, the statement could refer to crypto mined by licensed entities within Iran, as the Central Bank of Iran has previously said it was attempting to ensure all digital currencies traded in the country are mined from local farms.
The proposed bill would also officially place crypto mining under the regulatory purview of the Ministry of Industry, Mine and Trade, allowing it to grant licenses for farms. Licensed mining companies with partial or full control of a power plant could apply with the country’s Energy Ministry to sell off any surplus electricity.
Crypto mining as an industrial activity has been legal in Iran since 2019 as long as the miners are licensed and regulated accordingly. However, Iranian President Hassan Rouhani announced in May that mining operations would be prohibited until September. Authorities have seemingly been stepping up their raids on unlicensed miners tapping into the power grid as the country faces increasing demand for energy in the summer months.
In June, Rouhani said Iran needed to legalize cryptocurrency to preserve and protect national interests at a meeting of his cabinet’s Economic Coordination Board. The president called for a joint study between agencies in capital markets and news to establish a legal framework for cryptocurrencies.
Iran Pauses Electricity Exports Due To Crypto Mining And Hot Summer
Discounted tariffs made Iran attractive to miners, now the country is having a hard time closing the gap between the production and consumption of electricity.
Iran’s challenge with the ever-increasing electricity consumption has reached new heights, leading the country to halt electricity exports.
Abuzer Salihi, general manager of Iran’s electricity distribution company Tevanir, announced on state television that it has reduced electricity exports to zero “so that there is no problem in electricity supply in the country.” He said that the electricity supply to Afghanistan’s Herat province, which imported 70% of its electricity from Iran, completely stopped in order to meet domestic needs.
According to the numbers shared by Tevanir, the daily electricity demand reached over 65,000 megawatts, while production is around 54,000 megawatts. Aside from the summer heat, Bitcoin (BTC) and crypto mining activities in the country — known for its significant electricity subsidies for the local industry — are listed as one cause of the high power demand.
Iran made crypto mining legal in 2019 to license and regulate miners within the country. But the country has also seen a spike in unlicensed mining activities, with many unlicensed miners using the residential electric grid to power up energy-consuming mining rigs.
Iran’s first measure this year was to fine crypto miners using household energy.
A ban on mining until the hot summer months pass followed. Announced by President Hassan Rouhani in May, the crypto mining ban will last until September to ensure access to electricity for domestic consumption. Rouhani also claimed that 85% of the mining activity in Iran is unlicensed.
As a last resort before halting electricity exports, the country also called on all legally operating crypto miners to stop their activities. Eshaq Jahangiri, the first vice president of Iran under Rouhani, made the announcement during a meeting with officials of the Ministry of Energy. “We will ensure that the electricity will not be cut off in essential and important places,” he said.
Meanwhile, Iran continues its crackdown on illegal mining activities. Last month, authorities confiscated more than 7,000 mining rigs at a farm operating in the capital of Tehran
Iran’s Internet Shutdown Emphasizes Need For Decentralized Mesh Networks
How decentralized technologies can address authoritarianism.
Iran’s government shutdown internet access across the country in response to widespread protests. Iranians have taken to mesh networks to regain some access, emphasizing the need for a more decentralized alternative to the internet.
Protests broke out across major cities in Iran after the country’s government began raising the prices for gasoline. Although prices remain lower than the rest of the world, it is another injustice among a growing list. So far the protests have resulted in more than 1,000 arrests, several injuries, and a few deaths.
The government responded to these protests by staging an internet black out, blocking protestors from communication with one another or with anyone outside of the country.
Iran’s Internet Blackout
Shortly after Iranians began reporting poor Internet connectivity, NetBlocks, a non-governmental organization that monitors Internet accessibility around the world, confirmed that “Iran is in the midst of a near-total national Internet shutdown.” NetBlocks also added:
“The ongoing disruption is the most severe recorded in Iran since President Rouhani came to power, and the most severe disconnection tracked by NetBlocks in any country in terms of its technical complexity and breadth.“
The blackout includes all social media services, such as WhatsApp and Instagram. For protestors looking to organize events and spread information, the Internet disruption has been a major obstacle. There are also concerns that without the ability to share and document the events happening throughout the country, it would be difficult to implicate the Iranian government of wrongdoing.
When citizens attempted to connect to the Internet via their mobile devices, they were met with a recorded message from the National Security Council indicating that connectivity had been disconnected. To get a better understanding of how this is possible for a country with a population of 80 million, it is necessary to dig into changes Iran has been making to its telecommunications services.
The country’s leaders have been battling with similar economic protests in Iran since 2017. As such, the government has taken steps to gain more control over typically decentralized networks. In 2005 officialss first began work on a “national Internet,” sometimes called the “clean Internet,” and sought to distinguish the Iranian Internet experience from the rest of the world through censorship.
This was accomplished through agreements between private companies and the government, as well as technical solutions. Much of the same is happening in countries like Russia, Ethiopia, North Korea, and Venezuela. Similarly, China built its national Internet with such controls implemented from the beginning.
Since these adjustments have been in place, Iran has been able to bring Internet connectivity to five or seven percent of its typical levels. At the same time, Ayatollah Seyed Ali Khamenei, the country’s supreme leader, continued to post on Twitter.
Forming a Peer-to-Peer Internet
In response to the shutdown, citizens turned to alternatives to bypass the intranet and communicate with one another. A local service called Toosheh, previously used to hack satellite televisions and stream “bundles” of typically censored content, has been gaining traction.
The NetFreedom Pioneers, a group of American and Iranian activists behind the project said that “It can’t be censored…it comes from the sky. Our users just get a big folder of content, and there’s no trace of it on the Internet.”
Now, with the protests in Iran in full swing, Toosheh is doing a lot more than just streaming videos. Hacker News, a popular forum for all things tech, hosted a conversation from Nov. 17, 2019 around Iran’s Internet blackout. One person wrote:
“I live in Iran and I am lucky enough to have a connected link right now, but this is the last link among the others I lost in the previous hours. I was wondering is there any stable solution like satellite Internet or something without direct affiliation with government for people like me, desperate enough to ask questions like this.“
A fellow Iranian responded with a link to Toosheh adding, “install Toosheh while you can.” The conversation on Hacker News also cited the use of mesh networks and “a decentralized, blockchain-based DNS” to instantiate a truly “free” Internet. Scanning the crypto space over the past few years, such visions are not uncommon.
GoTenna, for instance, is a device about the size of a USB key which, when paired with other devices, can create a local network. Participants can pass encrypted messages and hop between other users without the use of the Internet. The technology has been welcomed by the cryptocurrency community with developers combining the two services to oust not just banking services, but other tech conglomerates from spying on participants’ activity.
Similar services like Locha Mesh, SmartMesh, and New Kind of Network (NKN), are all pursuing similar ends. Each outlines an alternative view of the Internet, some of which also use cryptographic tokens. Instead of an internet dominated by centralized providers, which are often beholden to local governments, the groups building these mesh networks are executing on the idea of a ‘free’ internet. This idea isn’t new. Early proponents like John Perry Barlow had a vision for an unencumbered internet in the nineties.
In his most famous work, “A Declaration of the Independence of Cyberspace,” Barlow wrote in 1996, “governments of the Industrial World, you weary giants of flesh and steel, I come from Cyberspace, the new home of Mind. On behalf of the future, I ask you of the past to leave us alone. You are not welcome among us. You have no sovereignty where we gather.“
Written in 1996, nearly a decade before the launch of Facebook, the 2008 financial crisis, and more than twenty years before the protests in Iran, one can only wonder what Barlow would make of the Internet experience in 2019.
Water Shortages Threaten Iran With Political And Economic Apocalypse
The country’s own environmental expert has predicted massive population displacement as provincial aquifers on the verge of running dry.
Amid the escalating protests over water shortages in Iran’s oil-producing Khuzestan province, government officials in Tehran are unable to fall back on the old excuse that nobody could have seen the crisis coming. They themselves did.
In 2015, Isa Kalantari, a former Iranian agriculture minister, warned that water scarcity would force 50 million Iranians — 60% of the population — to leave the country. He complained that officials in Tehran had for too long ignored the problem, adding: “And now that they understand it, it’s a little late.”
Two years later, this Cassandra was given the opportunity to do something about the calamity he had prophesied: Kalantari was appointed the Islamic Republic’s vice president for environmental protection — effectively, its environment minister.
Since then he has done little more than pronounce even more dire auguries. At the start of this summer, he predicted a “water war” that would spread in the countryside, putting Iran in danger of being “wiped out.”
This is hardly reassuring to Iranians in the provinces that have been parched by what Kalantari’s colleague, Energy Minister Reza Ardakanian has described as the driest summer of the past 50 years. But the sun-baked villages Khuzestan are not taking up arms against each other: Their anger is directed at the government in Tehran. Across the province, protesters are calling for the downfall of the regime and of Supreme Leader Ali Khamenei.
And it’s not just about the lack of water, either. The scarcity is only one manifestation of the central government’s failure to provide basic services for a province that has been aggressively exploited for its resources.
There is also an ethnic dimension to the demonstrations: Khuzestan is home to most of Iran’s ethnic Arab minority, who feel ignored — and sometimes regarded with suspicion — by Tehran.
This combustible combination is set alight every summer, the resulting conflagration grows hotter yearly and spreads wider. Tehran invariably responds with brute force, inflicted by the police, the Islamic Revolutionary Guard Corps and the Basij militias. If the protesters persist, the violence will likely escalate next month with the elevation of the new president, the hardline cleric Ebrahim Raisi.
There are other pressing problems awaiting Raisi: Iran’s economy is in parlous condition, negotiations to lift American sanctions have stalled and the country is experiencing a new wave of Covid-19 cases and deaths. The new president also faces questions about his political legitimacy — his election, after all serious rivals had been disqualified, was undermined by Iran’s lowest-ever turnout.
But the water crisis is arguably the most intractable of Raisi’s challenges. Climate-change trends point to hotter, drier summers in the years ahead, and Iran’s ground water sources are already depleted to a dangerous extent.
Like Khamenei, Raisi believes the Islamic Republic, in order to insulate itself from international pressures, must have a “resistance economy,” the key pillar of which is agricultural self-sufficiency. That is obviously impossible while the country faces what environmentalists have described as an impending water bankruptcy.
Ironically, the water scarcity is to a considerable extent the result of the regime’s desire for agricultural independence. Tehran has for decades encouraged widespread cultivation of essential crops, incentivizing farmers to use any and all the groundwater they can get. As a result, environmentalists reckon the aquifers in 12 of Iran’s 31 provinces will run dry in the next 50 years.
Water above the ground is growing scarcer, too. Excessive damming of Khuzestan’s rivers has dried up the province’s lakes.
The political fallout of all this is not hard to predict: Climate migration on an epic scale. If Kalantari’s predicted number, 50 million, seems high, huge numbers of Iranians are already moving from the countryside to urban centers, where they are swelling the ranks of the unemployed — and the angry.
The leadership in Tehran won’t need reminding of what happened the last time this occurred. The dissatisfaction of the urban underclass was the kindling for the 1979 revolution that created the Islamic Republic. The fire next time could burn it down.
Iran’s Tax Authority Wants To Legalize Crypto Exchanges
The Iranian tax agency has called for establishing a legal framework for crypto trading platforms so they can be taxed properly.
The Iranian National Tax Administration (INTA) is pushing to establish a legal framework for the taxation of crypto trading platforms operating in the country, according to a new proposal by the country’s tax authority.
Two months after Iranian President Hassan Rouhani’s call for a legal framework for crypto trading, INTA reportedly detailed the necessity of legalizing digital asset exchanges in a proposal quoted by the local media.
Reminding Iranian regulators that a legal framework is required for levying taxes, INTA said that the government should only allow authorized exchanges to convert currency while keeping track of transactions.
The tax authority urged to keep the legal framework on the broader side of the spectrum to avoid harsh conditions for crypto exchanges that could cause the proliferation of a black market.
Tax on capital gains, fixed base tax and occupational tax are the three tax regimes on crypto trading platforms proposed by the INTA, though the proposal does not specify the mechanisms for taxing crypto businesses.
Decentralized finance also made its way into the proposal, according to the sources. To comply with Anti-Money Laundering regulations, the proposal wants to establish an upper limit on transactions occurring on decentralized exchanges.
As Cointelegraph reported in early July, the Iranian Parliament Commission on Economy drafted a new bill to restrict the use of cryptocurrencies within the country while providing a clearer legal framework for miners.
Crypto mining is still legal for licensed miners operating in Iran, although it’s temporarily banned until September due to energy concerns during the hot summer months. Miners are recognized as owners of the digital assets they mint.
Converting one cryptocurrency to another is not illegal, either. But the current law only allows banks and licensed exchanges to use digital currencies mined in Iran to pay for imports, while crypto cannot be used for payments within the country.
Iran law enforcement spent the summer conducting raids on unlicensed crypto miners. Police seized as many as 7,000 mining rigs in several operations. Last month, the government asked the licensed crypto miners to halt production altogether until further notice.
Illegal Crypto Mining Not The Cause Of Power Shortages In Iran, Ministry Says
Iran’s Ministry of Industry, Mine and Trade questioned Tavanir’s claims that illegal mining activities consume 2,000 megawatts of power.
Iran’s Ministry of Industry, Mine and Trade reportedly dismissed claims by leading power company Tavanir that blamed illegal cryptocurrency miners for the ongoing power shortages in the country.
According to a report by the Financial Tribune, Alireza Hadi, the ministry’s director of investment and planning, said that the figures announced by Tavanir “seem to be highly exaggerated.” Hadi questioned Tavanir’s claims that illegal mining activities consume 2,000 megawatts of power. “This amount would equal power used by 3 million pieces of hardware,” he said.
While mining cryptocurrency has been legalized by the Iranian government, Tavanir blames unregistered miners for nationwide power shortages. In August 2021, Tavanir spokesperson Rajabi Mashhadi said:
“Unauthorized miners are the main culprits behind the power outages in recent months. We would have had 80% less blackouts if miners had halted their activities.”
Tavanir also claims to have shut down operations for over 5,000 mining farms in addition to confiscating 213,000 unauthorized mining hardware that was capable of consuming 850 megawatts.
To date, Iran’s Ministry of Industry, Mine and Trade has authorized 56 mining farms that collectively consume 400 megawatts, according to Tanavir’s estimate. In 2020, the ministry authorized and registered 126,000 pieces of mining equipment, which consumed 195 megawatts when running at full capacity.
Last year, whistleblowers helped Tavanir close down 1,100 crypto mining farms that allegedly did not have proper licenses.
Iranian citizens who help the authorities track down illegal miners were awarded 100 million rials ($480) as a bounty. Although Iran has approved registered businesses to conduct mining operations, authorities had warned crypto miners to register their business and equipment before the end of 2020.
Tehran Stock Exchange CEO Resigns Following Discovery Of Bitcoin Miners In Basement
Iranian authorities have conducted many raids on crypto miners in abandoned factories, homes and small businesses — nothing quite as high profile as the country’s largest stock exchange.
Ali Sahraee, the chief executive officer of the Tehran Stock Exchange since 2018, has reportedly resigned after the discovery of cryptocurrency mining rigs in the building.
According to a report from the country’s state-run media, the Islamic Republic News Agency, Tehran Stock Exchange, or TSE, market vice president Mahmoud Goudarzi will be leading the company following the departure of Sahraee.
The change in leadership seems to be the result of “a number of miners” being discovered in the basement of the TSE building located in the district of Sa’adat Abad.
The TSE reportedly initially denied the existence of the miners, saying the equipment was part of a research project. However, executive deputy director Beheshti-Sarsht later said the company should be held accountable for its actions.
Iranian President Hassan Rouhani announced in May that Bitcoin (BTC) and cryptocurrency mining would be prohibited over the summer in an attempt to reduce the demands on the country’s power grid.
It’s unclear when authorities discovered the mining rigs in a “sudden inspection” of the TSE basement, but the activity was seemingly still illegal until the last week of September.
During the ban, authorities conducted many raids on crypto miners big and small, seizing illegally operating miners and fining households responsible for generating blocks. However, the majority of the raids were focused on abandoned factories, homes, and small businesses — nothing quite as high profile as Iran’s largest stock exchange.
The energy crisis in Iran has led to blackouts and brownouts, with many officials blaming crypto mining for sucking up the juice. However, an August report from the country’s Ministry of Industry, Mine and Trade said that the claims that some authorities had made regarding the power usage of crypto miners “seem to be highly exaggerated.”
Billion-Dollar Bitcoin Mining Industry Resumes In Iran After Three-Month Ban
The extreme heat of the summer has subsided, so crypto mining has been given the green light, as it can no longer be blamed for stressing the electricity grid.
The Iranian government will allow licensed cryptocurrency miners to resume operations today following a three-month ban imposed by former President Hassan Rouhani on May 26, 2021.
The initial ban was put into effect due to concerns over the stability of the country’s unreliable power grid.
The Middle Eastern country experienced widespread power outages in the summer, which former President Rouhani attributed to extreme heat. On some days, the heat topped 120 degrees Fahrenheit, or nearly 49 degrees Celsius.
Middle East and Central Asia are under the harshest heat wave in history for this time of the year. In #Iran 51.0C at Omidieh,50.1C at Abadan,45.5C at Bam (920m asl). In Turkmenistan 46.7C Uchadzhi,in Uzbekistan 44.7C at Termez,in Tajikistan 43.7C at Isambaj (563m). pic.twitter.com/AQ5bpt93vM
— Extreme Temperatures Around The World (@extremetemps) June 5, 2021
In light of the power outages and a water shortage, Rouhani decided to ban crypto mining during the heat to ensure citizens could keep their air conditioners running — although doubts have been expressed in some quarters about how much power crypto mining actually consumes in the country. With the heat dying down and Ebrahim Raisi taking office as president on Aug. 3, 2021, the crypto mining ban has been lifted.
An estimated 4.5% to 7% of the world’s cryptocurrency mining is done in Iran. It may come as little surprise that Iran boasts some of the cheapest electricity prices in the world thanks to abundant fossil fuel resources such as natural gas.
There are some reports that suggest the country looks favorably on Bitcoin (BTC) mining as a way to evade sanctions from the United States. Iran currently suffers from a near-complete embargo by the U.S., negatively affecting the nation’s economy. At current estimated levels of mining in Iran, revenues are estimated by Elliptic via Reuters to be around $1 billion.
Despite the ban, underground mining reportedly continued, and on Wednesday, news broke that Ali Sahraee, the director of Teheran’s Stock Exchange (TSE), had resigned after the state-run media reported that cryptocurrency mining was taking place at the exchange during the ban.
TSE leadership first denied the existence of the mining operation, but later, executive deputy director Beheshti-Sarsht admitted that the TSE should be held accountable for the operation.
Iran Blockchain Association Head Calls For Special Council On Crypto Laws
The Blockchain Association is offering to assist with crypto regulations in the Islamic state.
According to Iran’s main blockchain organization, authorities have been remiss in their enforcement of cryptocurrency laws. The association is concerned about the government’s inactivity, offering its help to regulators that it feels are inadequately prepared to handle such a challenging task.
Abbas Ashtiani, head of the Iran Blockchain Association (IBA), said that Iranian regulators such as the Central Bank of Iran (CBI) are unable to regulate digital assets.
The IBA has requested for the establishment of an “independent counsel” to assume responsibility, according to a report by the Financial Tribune.
While Speaking At A Press Conference Held On Tuesday, Ashtiani Explained:
“We need a special council of representatives from state bodies and private enterprise to craft regulations for cryptocurrencies. The CBI or the Security and Exchange Organization are not qualified [enough] to set rules for cryptos given the multidimensionality of the issue.”
While Bitcoin (BTC) mining is permitted in Iran, using crypto for payments is not.
However, banks and licensed money changers are allowed to use digital currency generated by authorized miners in Iran to pay for imports.
Miners must obtain a license from the Ministry of Industries and pay their power bills, which are based on export pricing. According to the most recent data from earlier this year, about 30 businesses have obtained mining licenses in the country.
However, underground mining concerns are still an issue in the country. As reported by Cointelegraph on Sept. 29, the CEO of the Tehran Stock Exchange resigned after discovering Bitcoin miners in the basement.
In response to government officials’ worries about illegal activities linked to the mining and trading of cryptocurrencies, Ashtiani said that the Iran Blockchain Association understands lawmakers and assures them that their worries will be addressed:
“We are ready to help set rules that can help ensure a positive impact of cryptos on the economy while minimizing criminality.”
Iran Halts Authorized Crypto Mining To Save Energy For Winter
Iran previously put a temporary blanket ban on crypto mining amid historically peak periods for power demand in summer.
Amid Iran’s energy consumption increasing during the winter, local energy authorities have decided to halt operations of authorized cryptocurrency mining centers.
Mostafa Rajabi Mashhadi, chairman of the board and managing director of Iran Grid Management Company (Tavanir), announced that Iran is shutting down crypto mining centers again to reduce liquid fuel consumption in power plants amid decreasing temperatures.
Mashhadi said that Iranian authorities took this action to reduce energy consumption last month, The Islamic Republic of Iran Broadcasting reported on Saturday.
“The Energy Ministry has been implementing measures since last month to reduce the use of liquid fuels in power plants, including cutting licensed crypto farms’ power supply, turning off lampposts in less risky areas and stringent supervision of consumption,” he said.
The executive emphasized the importance of saving energy in the country, calling on citizens to reduce their electricity and gas consumption as much as possible as well. According to local reports, 70% of the fuel consumed in Iran is used for heating buildings. The new energy-saving measures are reportedly expected to cut energy consumption by at least 40%.
While enforcing restrictions on authorized crypto mining operators, the Iranian government has also been working to combat illegal crypto miners.
In late November, local energy authorities announced that they had in total seized 222,000 mining devices used for illicit mining crypto since the industry regulations were established.
Iran is one of the world’s biggest crypto mining countries, accounting for an estimated 4.5%–7% of the global Bitcoin hash rate. The country previously put a temporary blanket ban on crypto mining in the summer, citing historically peak periods for power demand due to hot temperatures. The ban was subsequently lifted in September as the Iranian power grid became more stable.
Iran Is Crushing What’s Left of Internet Freedom
New legislation would ban VPNs and restrict access to Instagram, choking the country’s burgeoning e-commerce sector.
Iranians like to boast that their forebears built a great wall 1,000 years before the Ming Dynasty. Known as the the Red Snake for the distinctive color of the mud bricks used, it had a more sophisticated design and sturdier construction than the later Chinese version. But they served the same purpose: to keep out foreign invaders.
The current rulers in Tehran can’t claim any substantive achievements ahead of their counterparts in Beijing, but they do share the same paranoia about foreign influence. So, Iran is hoping to replicate China’s so-called Great Firewall of digital and legislative barriers, as much to pen its own people in as to bar outsiders.
The effort, begun under the previous administration, has been accelerated by the new hardline president, Ebrahim Raisi, who is cracking down against internal dissent while railing about the need to keep Iranian cyberspace safe from its enemies. Security agencies like the Islamic Revolutionary Guard Corps are especially keen on Chinese expertise in surveillance, both online and off.
By the World Bank’s reckoning, 84% of Iranians use the Internet. For several years now, the regime has blocked access to tens of thousands of websites, as well as social-media platforms like Twitter and Facebook. Restrictions are routinely tightened during periods of heightened state repression, such as the violent crackdown against antigovernment protests in the fall of 2019.
But Iranians have learned to circumvent official obstacles by using satellite dishes and virtual private networks, or VPNs. This gives them access to information from abroad; perhaps more important, it allows them to communicate with each other and with the wider world in times of crisis, safe from the prying eyes of the state and its security agencies.
That is how news and images of the 2019 crackdown, and more recent protests, got out.
Now the Raisi administration is moving aggressively to plug any holes in its digital barricades. With Chinese assistance, it is building a “national” Internet that will be cut off from most of the World Wide Web — a perversion of that most Persian of innovations, the walled garden.
And the Iranian parliament is ginning up legislation to criminalize the use of VPNs, require IDs for web access and give security agencies complete control of the Internet.
Arguably the most consequential piece of legislation in the recent history of the Islamic Republic, the so-called Protection Bill, is currently being reviewed by a select committee of parliament, and is expected to be ratified in the spring.
In addition to squeezing the limited space for free expression and political dissent, it will also have a chilling effect on Iran’s e-commerce sector, a rare bright spot in an economy straitjacketed by sanctions and battered by the Covid-19 pandemic.
When it is enacted, the legislation will effectively end the Instagram exception: It is the only social-media platform Iranians can use without a VPN.
Even if Meta, the platform’s owner, was willing to comply with the provisions of the bill — foreign firms would have to collaborate with the state security agencies, for instance — it would be barred from doing so by U.S. economic sanctions.
Shutting down Instagram would be devastating for millions of people who depend on it for income. With no access to other large e-commerce networks and messaging apps, Iranian businesses use the platform to display their wares and to communicate with buyers and suppliers.
Holly Dagres, a senior fellow at the Atlantic Council who researches Iranian social-media habits, says it is also popular among “homemakers looking to become financially independent” to sell goods and services. The restrictions imposed during the pandemic have, if anything, deepened this dependence.
The Iranian authorities want all this commerce to move to homegrown apps and the national Internet, many of which are facsimiles of popular Western apps. Some businesses undoubtedly will. But many entrepreneurs and consumers will be slow to make the switch, whether for fear of surveillance or out of concern about the reliability of the apps and sites.
For the Raisi administration, however, an e-commerce slowdown may be an acceptable tradeoff for tighter control of cyberspace. With discontent growing among ordinary Iranians — witness the recent protests over water scarcity and teachers’ wages — the regime will want to build its walls high, thick and quick.
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