Unusual Power Cuts Put Illegal Crypto Mining in the Limelight

Talking to reporters on Wednesday, his chief of staff Mahmoud Vaezi said the intelligence and interior ministries have been told to investigate reports that illegal bitcoin farms are operating in places like aviculture houses and abandoned factories using subsidized electricity, IRNA reported. 

While mining cryptocurrency is accepted by the government as legal, there are increasing number of miners who illegally use the highly subsidized power because they have to pay much higher tariffs if they operate with a permit. 

The steep rise in cryptocurrency prices in recent weeks has apparently made mining more tempting in Iran. 

Bitcoin hit a record high of $41,000 on January 8. It doubled in less than a month and jumped by more than 700% since the Covid-19 pandemic was first declared in March last year, rising from about $5,000. Now hovering around $35,000, the virtual currency plunged in the past three days after hitting the all-time high. 

In the past several days rising home gas consumption disrupted gas supply as feedstock to power plants declined forcing utilities to use mazut, a highly polluting and low quality fuel oil. That caused unprecedented air pollution in big cities, obliging power plants to resort to mazut and announce rolling blackouts.

Iran Power Generation, Distribution and Transmission Company (Tavanir) said Tuesday the widespread power outages in the capital was due to cuts in feedstock deliveries to power stations. 

The state-run company said demand had surpassed 7,000 megawatts in Tehran Province.  Eleven districts in the sprawling city experienced at least two hours of blackout on Tuesday. Power outages were reported in other cities across the country.   

The managing director of Tavanir Mohammad Hassan Motevalizadeh on Wednesday blamed cryptomining as one of the reasons that has led to the power shortages unheard of in recent memory.  

Tavinir will launch a nationwide program from Thursday to detect illegal electricity subscriptions and unauthorized crypto miners, he said.  

Motevalizadeh added that the government has considered rewards of up to 200 million rials for whistleblowers who report illegal cryptocurrency mining, the IRIB website said. 

So far 500 cryptomining farms have been reportedly uncovered with the help of whistleblowers, but no details are available. 

***Seasonal Tariffs 

As per rules, authorized miners are charged 4,800 rials for one kilowatt-hour that is half the electricity export rate in autumn, winter and spring. However, billings are based on 19,300 rials/kw or twice the price for exported electricity in summer (June to Sept). 

According to Mostafa Rajabi Mashhadi, the Tavinir spokesman,  24 cryptomining units using 310 MW have permits from the Ministry of Industries, Mining and Trade. 

Rajabi Mashhadi earlier claimed that 1% of the power is  used by legal cryptocurrency mining farms. But on Wednesday he said work of legal miners will also be restricted if the power outages continue. 

Those who illegally use subsidized power will be fined depending on losses they inflict on the national grid. "Their mining places will by disconnected from the national grid and wrongdoers will face prosecution."