Crypto Mining Rules Expounded

EghtesadOnline: The government says it recognizes mining of cryptocurrencies as an industrial undertaking and sent a directive to the relevant government bodies at the weekend.

News ID: ۷۴۸۱۰۰

07 August 2019

Rules primarily include details regarding procedures on granting permission to miners, price of electricity, taxation and earnings repatriation.

In a talk with ISNA, the Energy Ministry spokesman for power department, Mostafa Rajabi discussed ways about implementing the rules.

Rajabi said crypto miners “should first receive special permits” from the Ministry of Industries, according to Financial Tribune.

As for electricity prices for the rapidly mining business, he said “bills will be sent based on average power export rates in rials as per forex parity rates in the secondary market, known as Nima (Persian acronym for Integrated Forex Deals System).”

A dollar in Nima was selling for a little less than 120,000 rials.

Two Options

Prospective miners have two options regarding their use of electricity. They can either directly use the national electricity power grid or use mini-grids.

Those who want to establish power plants should first decide the location and subscribe to the national gas grid. The feed gas rate will be equal to 70% of natural gas export prices.

Regarding those who want to use the national electricity grid, Rajabi said their bills will be calculated based on consumption.

If, for instance, their consumption is less than 7 megawatt, they will be referred to power distribution companies. Those using more than 7 MW will have to deal with the regional electricity companies.

He warned miners that they must first have permits or will face prosecution, underscoring the Energy Ministry jurisdiction to cut power supply to unauthorized miners.

Rajabi said those who intend to use household electricity for mining cryptocurrencies must also apply for a special permits.

He stressed that overconsumption of households if they are involved in crypto mining activities is easy to detect.

“The average consumption of 80% of subscribers in temperate climate is less than 300 kwh in summer. As such, overconsumption is easily verifiable.”

Regarding use of consumption of mining equipments, he differentiated between first and second generation devices, saying power consumption by the former is double compared to the latter.

Older equipments consumption is 864 kilowatt hours higher than others, he was quoted as saying.

Levying Tax Out of Place

While commending the government decision to accept  crypto mining as an industrial activity, the head of Iran Blockchain Community, Sepehr Mohammadi, criticized the terms in a government bylaw that says “as with other industrial activities, mining cryptocurrencies is  taxable.”

“There is no sense in levying tax on mining activities when the miners are obliged to pay their bills based on prices for electricity export, ” IBENA quoted him as saying.

He said miners can repatriate a portion of their earnings to the country if there are proper mechanisms in place for trading cryptocurrencies.

Government regulations are not clear about trading in cryptocurrencies outside the country. However, the government has banned all domestic crypto trade, disclaiming any responsibility for risks emanating from digital trade using crypto.

The government says crypto mining activities could be eligible for tax exemption if crypto miners repatriate their earnings to the country.

Energy officials say as mining cryptocurrency consumes huge amounts of subsidized electricity, its earnings should return to the country. If not it would be considered as capital flight.