Controversy over the operation of vast computer networks using subsidized cheap electricity in Iran to mine bitcoins shows no sign of abetting.
In recent days, Iranian government officials began talking about the existence of ventures in various parts of the country, where unidentified people set up hundreds or perhaps thousands of computers in old warehouses or factory buildings to crack codes that would “mine” digital currencies for them.
Apparently, digital currencies can be obtained if certain super-complex codes can be broken – a feat possible by using huge computer networks. The problem is that a lot of electricity is needed; if an investor uses too much energy at regular prices, then the payoff might not be worth it.
But in Iran electricity is extremely cheap partly due to government subsidies, allowing for certain people, apparently including Chinese, to be involved in bitcoin “mining” ventures.
Another reason for cheap electricity is the devaluation of Iran’s currency against major world currencies. The Iranian rial has lost its value fourfold against the US dollar in the last 18 months, mainly due to US sanctions, while electricity prices have remained constant. Therefore, any economic activity heavily dependent on fossil fuels or electricity in Iran that can generate incomes in hard currency can be very profitable.
But the government is facing an unprecedented financial crunch due to backbreaking US sanctions, and suddenly the digital mining issue has been brought to the foreground.
Iran's minister of communications has praised the currency mining initiative, but the government says such operations need to be licensed and pay taxes. In other words, the government wants its share of profits.
On Saturday, July 6, reports in Iranian media indicated the government was shutting down digital farms and demanding that investors come forward and apply for licenses.
In the city of Roodbar, a prosecutor has said that he is building cases against bitcoin mining operations on the grounds of abusing electricity use and keeping “illegal merchandise”.
Iranian Minister of Communications and Technology Mohammad Javad Jahromi, who was visiting China this week, said that if electricity is used during non-peak hours, the government can agree with these operations and issue licenses, adding that digital mining operations have now moved from China to Iran in order to take advantage of the cheap electricity.
He insisted that the Chinese government is not involved, but China’s private sector is interested.
Jahromi also reassured the public that using cheap energy by miners is not a crime and can be considered as similar to “exporting electricity”, which Iran does. But the issue is these operations have to become legal by obtaining permits.
Reports from Iran say that computers used for this purpose are special machines, and their networking also needs a lot of equipment, some of which is in fact illegal to import into the country. But somehow not only shadowy operators have obtained the machines, but the networks have even been found to exist in some government institutions.
These kinds of references in Iranian media are often cryptic and vague, but they point to the tip of possible icebergs beneath the surface of what is revealed in the media.