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Iran Legalizes Crypto Mining Within Days of a Chinese Plea for ‘Better Conditions’

Last Updated March 4, 2021 2:38 PM
Jose Antonio Lanz
Last Updated March 4, 2021 2:38 PM

Iran is legalizing crypto-mining, giving a boost to this activity which was already booming despite the unfavorable position of the authorities.

According to the Iran Chamber of Commerce, Industries, Mines and Agriculture, the government decided to give the green light to this activity, promoting a series of legal reforms that put an end to a period of uncertainty, misunderstandings, persecutions and contradictory statements among officials.

Iran Mining: From Threat to Business Opportunity

Iran is one of the countries where crypto-mining is the most profitable. due to cheap electricity prices and subsidies. For this reason, over the past few years, a wave of miners flooded the country, causing severe problems in the distribution of energy across many regions. This led the country to actively persecute this activity —a decision that did not stop the miners but made them go underground.

However, due to the unilateral sanctions imposed by the U.S. government and the escalation of tensions between the two countries, the Iranian government began to show a more favorable face on this issue, but without assuming any specific position.

Iran announced the creation of its own gold-backed cryptocurrency as a way of promoting commercial transactions after its exclusion from the SWIFT system, but the use and trading of cryptocurrencies is still in a kind of legal void. Mining was in the same situation —until yesterday.

The increase in mining activity was of great concern to the United States lawmakers as regulators believe that this activity could serve to bypass their sanctions. The U.S. government has reportedly been working on a draft to sanction mining in Iran, according to some statements by Iranian officials.

Mining is Becoming a Geopolitical Issue

The mining problem has two strategic edges that the United States must take into account:

  1. On the one hand, Iran has many possibilities to develop this industry and obtain income outside the traditional financial system,
  2. On the flipside, the legalization of mining comes after Iran admitted that China officially asked for better conditions towards this activity, since many miners operating in the country are actually Chinese businessmen.

The short time between China’s request and Iran’s response may lead to the conclusion that these facts are not isolated, but the government has not confirmed this thesis. For the moment the Central Bank of Iran (CBI) Governor Abdolnaser Hemmati on Sunday only confirmed the approval of a mechanism to allow mining in the country:

A mechanism to mine digital coins was approved by the government’s economic commission and will later be put to discussion at a cabinet meeting

According to information from the Deputy Minister of Energy Homayun Haeri, the primary condition to let miners operate in Iran will be the payment of energy bills without the subsidy offered by the government to residential consumers. In this way, Iran would be stimulating its economy while receiving extra income from mining activity.

It remains to be seen whether the U.S. government will actually enforce a law sanctioning Iranian mining. The strong influence of Chinese miners in the region would put the American strategists in a more uncomfortable situation as they will now have to deal with a much more powerful adversary.