Crypto Mining Plus Side for Iran

EghtesadOnline: Legalizing cryptocurrency mining would help the power sector, head of the board of directors of the Power Generation Companies Syndicate said Monday.

News ID: ۷۴۷۸۷۶

16 July 2019

"Unlike the common belief that cryptocurrency miners put enormous pressure on the national power grid, because their consumption throughout the year is constant and has no voltage fluctuations, technically they are considered good consumers," Mohammad Ali Vahdati was quoted as saying by IRNA.

Drawing parallels between air conditioners and digital currency mining, he said the former adds to the power load on the grid whenever users turn on and off their units. The latter keeps working round-the-clock uninterruptedly and does not subject the network to added pressure.

Due to seasonal fluctuations in electricity demand, power stations should either generate more electricity or more plants must be built, he said. In the latter case, most plants stop working soon after peak-hour demand is met, according to Financial Tribune.

In summer electricity generation reaches its peak in all power plants. However, after the hot season hardly 30% of the power stations operate.

This is a big loss for the power sector as a 1,000 megawatt power plant costs $560 million. Thus, when a large number of plants are inactive most of the year it means national wealth is being wasted, he opined.

"Digital currency miners need non-stop power throughout the year. This means inactive power stations can keep running and the grid will not face voltage fluctuations."

Vahdati went on to say that if the fast emerging industry gets the legal approval in Iran, those interested will not have to function “in hidden farms.”

There also is the possibility of miners wanting to build their own small power plants and not depend on the national grid, the state news agency quoted him as saying.

No Clear Stance

Criticizing those in charge for not taking a clear and unambiguous stance on the legality of the digital currency, he noted, "If the official procrastination continues, we will see more illegal farms."

The Central Bank of Iran in April 2018 officially prohibited financial institutions from dealing in cryptocurrencies. However, CBI Governor Abdolnasser Hemmati recently said that the government is studying a plan that would authorize crypto mining.

If the plan is passed in the Majlis and becomes law, it will require crypto miners to pay the same price for electricity that is charged for power export [7 cents for each kilowatt-hour]. Electricity sold inside the country is heavily subsidized.

According to Ali Bakhshi, head of Iran Electrical Industry Syndicate, the Energy Ministry has also agreed on a tariff for electricity used in cryptocurrency mining.

“The ministry has proposed 7 cents for each kilowatt-hour consumed in cryptocurrency mining to the government for making the final decision,” Bakhshi said.

He noted that his syndicate has no objection to crypto mining and trading.

Evading Sanctions

“Crypto miners access to cheap electricity is what we are concerned about,” he said, adding that cryptocurrency could also offer an opportunity to evade economic and banking sanctions.

“We believe that a reasonable mechanism should be devised for cryptocurrency mining,” he emphasized.

No decision has been made on the price yet, but Mohammad Sharqi, chairman of the Blockchain Association of Iran believes that the proposed price is 14 times over and above the rates industries pay.

"The proposed tariff is unfounded," he said, noting that cryptocurrency is a fast growing industry that deserves support, but such high prices are disappointing.

According to Sharqi, there is no authentic data on mining hardware in the country. If it is 150,000, it would hardly account for 0.5% of the country's total power consumption, he said.

"Even if all miners in the world got together in Iran, their consumption would not exceed 12% of the power generated by the national grid."

In recent months several mining farms in the country have had their electricity cut off and mining gadgets confiscated.

Iranians have turned to cryptocurrencies as they seek better ways to circumvent the new US sanctions that limit their ability to access hard currency.

Bitcoin mining is a kind of energy arbitrage. Miners make their money when the cost of producing coins is lower than the operation of the mine itself, including electricity.