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Why Bitcoin Miners Are Fleeing China for Iran

Last Updated March 4, 2021 2:37 PM
David Hundeyin
Last Updated March 4, 2021 2:37 PM

Mounting cryptocurrency regulations have some Chinese bitcoin miners fleeing the world’s second-largest economy. Their surprise destination? Iran.

According to the Managing Director of the Iran Blockchain Association, Mohammed Sharqi, talks have already started between interested parties.

Confirming this in a statement to PressTV , Sharqi said:

“The Chinese have made requests through official channels for cryptocurrency mining in free zones.”

Iran Flip-Flops on Crypto Mining

iran bitcoin
Iran just can’t decide whether bitcoin is legal. | Source: Shutterstock

Iran has a complicated relationship with cryptocurrency.

While bitcoin mining is technically recognized as an industry, the deputy governor for new tech at Iran’s central bank has said that bitcoin trading is not legal in the country. The bank also banned lenders from providing services to crypto businesses – after which reports revealed the bank was considering launching a digital coin of its own.

Until last month, the crypto mining industry had experienced relatively smooth operations without unnecessary sanctions or too much meddling from Iran’s government.

However, a 7 percent spike in electricity consumption in the sanctions-ridden country triggered a government crackdown on crypto mining in June.

The Iran Blockchain Association’s Sharqi expressed concern that impending government regulations will end up driving the cryptocurrency mining business underground. Instead, the energy ministry should issue licenses for industrial electricity consumption.

“Our argument is there is a danger that these activities might go underground and to the homes of ordinary people, which is very dangerous, if there is a demand by foreign investors in this regard, the Ministry of Energy could take advantage of it, welcome them in order to develop infrastructure and produce electricity.”

Iran’s Schizophrenic Bitcoin Policy

Unlike the United States where most anti-cryptocurrency outbursts are driven by the fear of the dollar losing its supremacy to a non-state controlled currency, Iran fears that cryptocurrency could be used to funnel money out of the country.

That said, American sanctions have effectively rendered it a global pariah state with little or no access to the SWIFT network and global banking systems. So from a purely rational point of view, it would seem as if it has little to lose by recognizing crypto in a way that most other countries have not yet done.

The evidence suggests that Iran is probably missing a trick by ignoring the possibilities bitcoin trading could provide for the country, including an avenue to circumvent harsh economic sanctions.

Instead, the government retains a baffling dual position on crypto, hemming it in with trading prohibitions, and yet promoting crypto mining at the same time – unless an electricity shortage sets in.

Indeed, just last month CCN.com reported that Iranian authorities accused the U.S. government of working to block the country’s bitcoin mining operations based on a belief that they are an avenue to circumvent U.S.-imposed economic restrictions.

The schizophrenic policy of Iran on crypto trading and mining does not look like it will end anytime soon because the country’s electricity remains among the cheapest in the world thanks to a generous government subsidy. Statistics from Global Petrol Prices  reveal that while 1kWh costs on average $0.14 in the U.S. and $0.08 in China, Iranians pay only about $0.03.