Industries Ministry Denies Electricity Shortages Caused by Illegal Cryptominers

EghtesadOnline: An official at the Ministry of Industries, Mining and Trade denied “exaggerated” claims by the Iran Power Generation, Distribution and Transmission Company (Tavanir) about the role of illegal cryptominers in the ongoing power shortages.

News ID: ۷۸۶۹۱۵

30 August 2021

"Figures announced by Tavanir seem to be highly exaggerated. The consumption of illegal miners is considerably lower than the 2,000 megawatts estimated by the utility. This amount would equal power used by 3 million pieces of hardware, Alireza Hadi, the director of investment and planning at the ministry was quoted as saying by Way2pay.

Mining virtual currency is legal in Iran and miners are allowed to operate under rules approved by the government in July 2019.

While cryptomining is accepted by the government as legal, illegal farms have cropped up with increasing speed using subsidized electricity because they must pay much higher tariffs if they operate with a permit.

Tavanir has often blamed cryptomining as one of the reasons that has created nationwide power shortages.

“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,” the company's spokesman, Rajabi Mashhadi, said last week.

Tavanir has said it shut more than 5,000 cryptomining farms across the country, confiscating more than 213,000 pieces hardware used by unauthorized miners using 850 MW. The utility claims illegal miners are still consuming almost 2,000 MW.

"Currently 56 cryptomining farms are authorized to operate by the Industries Ministry…They collectively consume 400 megawatts. Last year 126,000 mining equipment were registered by the ministry consuming 195 megawatts."

Last year, the ministry gave cryptocurrency miners one month to register smuggled mining equipment. Most miners use illegal hardware smuggled prior to legalization of the business. As per law, unregistered mining equipment is illegal.

Iran has an installed capacity of over 85,000 megawatts while actual production is near 60,000 MW. The difference is due to power loss as well as the fact that power plants usually do not operate at full capacity because of several reasons, one of which is lack of water in dams that impact hydroelectric power production.

Cumbersome Rules

A recent study by the Cambridge Center for Alternative Finance said Iran is the sixth largest cryptomining hub in the world, accounting for under 4% of the global hash rate. Hash rate is the measuring unit of the processing power of the Bitcoin network.

Reports about illegal cryptomining in residential units and farms has become a permanent feature but no reliable numbers are available.

Businesses and experts blame the cumbersome rules and process for obtaining licenses along with the high electricity tariffs for the growth in underground cryptomining.

In April the Energy Ministry revised cryptomining rules as per which 16,574 rials is charged for one kilowatt-hour of electricity.

The new rate is more than three times the previous 4,800 rials for one kilowatt-hour. Electricity prices for cryptomining are set as per power export tariffs and based on daily currency rates at Nima -- a currency platform where forex is traded among importers and exporters.