While the war between Trump-led administration and the nation of Iran drags on, the country’s internal squabbles with its crypto sector have no end in sight either.
This week, a social media post by Oxford University researcher Mahsa Alimardani, depicted the new fad in Iran’s crypto sector. Amid the recent government crackdown, cryptocurrency miners have resorted to running their operations out of the religious centers.
Why? Iranian mosques enjoy free energy and now they are being used to create speculative assets.
Mosques don’t Pay for Energy in Iran
Islam is the dominant religion in Iran, and as expected, the laws of the religion and leaders are respected. Last year, the government made a pact to provide religious centers with free energy. In exchange, religious leaders had to ensure it was used for its intended purposes only.
This was the period where crypto was gaining massive adoption in the Islam nation. At one point, the government ruled to declare crypto mining as a separate industry within the economy but with the recent crackdown, that ship has sailed.
Mosques receive free energy in Iran. Iranians have set up Bitcoin miners in them. There’s around 100 here, producing around $260,000 USD a year. This money goes a long way in Iran’s choked sanctioned economy. https://t.co/fczwdqCPAd
— mahsa alimardani 🌒 (@maasalan) June 26, 2019
Naturally, such a favorable stance on mining would attract miners. It would, however, turn out that the country didn’t anticipate the increase in mining activity and the toll it would take. As at December 2018, the Atlantic Council, an international affairs authority, reported that the Iranian crypto mining industry was booming, so much that miners were making profits despite the sanctions from the West and crypto winter.
A Relationship gone Sour
Things began to deteriorate earlier this week when government officials allegedly began to seize mining equipment. According to a report on the issue, Mostafa Rajabi Mashhadi, an official at the Iranian Ministry of Energy, revealed that there had been a 7 percent upsurge in electricity consumption in June.
The official echoed the Ministry’s belief that crypto miners were responsible for this rise in electricity consumption levels, and they were simply taking preventive steps to avert any instability in the country’s power grid.
He added that going forward, the government will identify miners and cut them off the power supply until both parties can come to a reasonable agreement over the pricing structure for mining activities.
Iran is ranked top on the global energy subsidy list, according to the International Energy Agency. Tehran reportedly spends $45.1 billion annually to offset the actual costs of energy consumed and what consumers are billed. For comparison purposes, this bill represents about 10 percent of the country’s annual GDP for 2018.
Given its economic sanctions over its nuclear program and the continued increase in mining activity, such electricity rates are simply unsustainable, and the government will now need to make some concessions. However, given the effects of such move, miners have now been forced to think outside the box to keep their businesses afloat.
The religious centers still benefit from free electricity access, and bitcoin miners have chosen to ride with them, in a bid to maintain the status quo. Things might hold steady for a while, until the government comes up with appropriate pricing policies or shuts down the free power in the mosques.