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Iran bans bitcoin mining amid power crisis

A visual representation of digital cryptocurrencies, Bitcoin, Ripple, Ethernum, Dash, Monero and Litecoin is displayed on 16 February 2018 in Paris, France. [Illustration by Chesnot/Getty Images]
A visual representation of digital cryptocurrencies, Bitcoin, 16 February 2018 [Illustration by Chesnot/Getty Images]

Iran has moved to impose a four-month ban on mining of cryptocurrencies like Bitcoin amid unprecedented power outages in major cities including the capital Tehran, Anadolu Agency reports.

The ban, which has come into effect immediately, will last until September 22, said an official announcement.

Blaming the electricity crisis in the country on unlicensed bitcoin mining plants, President Hassan Rouhani said on Wednesday that illegal bitcoin mining consumes up to 2,000MW of electricity compared to 300MW used by legal bitcoin operations.

Iran's state-run electricity firm Tavanir said the country only has 50 licensed bitcoin farming plants, with 85 per cent of mining being carried out illegally, which consumes 95MW of subsidized energy per hour.

The ban on all legal and illegal mining farms comes amid a surge in electricity demand in recent weeks, with unannounced power outages across multiple cities affecting businesses and medical services.

According to Elliptic, the global leader in crypto-asset risk management and blockchain analytics, Iran now accounts for 4.5 per cent of the world's bitcoin mining, as operators are attracted by cheap power and vast natural gas reserves.

The electricity required for bitcoin mining operations consume around 10 million barrels of crude oil a year, which equals to 4 per cent of total Iranian oil exports in 2020, according to Elliptic.

READ: Iran enriching uranium to bomb-making level, warns nuclear watchdog

Experts say Iran has used cryptocurrencies as a means to circumvent sanctions imposed by Washington over its nuclear program, with China being the main investor.

The crypto-asset mining was recognized in Iran for the first time in 2019, after which a licensing regime was established to identify legal miners who paid for the electricity and sold their mined bitcoins to Iran's central bank. Thousands of illegal mining farms have been shut down in the past two years.

In January this year, a major cryptocurrency mining plant jointly operated by an Iranian-Chinese was shut down in the south-eastern province of Kerman.

It came after a viral video showed thousands of bitcoin machines operating at the facility in Rafsanjan city of Kerman, using 175MW of electricity from the total 600 MW allotted to all cryptocurrency factories in the country.

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