As blackouts and police raids roil the upstart Iranian Bitcoin mining industry, a match between a permissionless currency and a country throttled by inflation that once seemed like a perfect fit is now being called into question.
As Cointelegraph has previously reported, Iran joins Pakistan as a cryptocurrency superpower in the Middle East, owing in part due to cheap, heavily subsidized electricity prices, as well as a boost in activity following an approval of Bitcoin mining as an “industrial activity” for power plants in 2020. It’s been estimated that there are well over 1000 legal entities currently engaged in mining activities.
However, the short history of cryptocurrency mining in the country has not always been a rosy one. Authorities have moved to shut down at least a thousand illegal farms in recent months, and Bitcoin spot prices have been mispriced at time relative to the rest of the world due to high demand as investors flee the rapidly inflating rial.
Now, another source of friction has emerged as the country is plunged into frequent power blackouts in large population centers.
On January 16th, multiple outlets reported that Iran suffered blackouts throughout most of the country. Social media reports have indicated that power has been spotty both before and after the outage on the 16th, however, with multiple cities experiencing blackouts all through the past two weeks.
Authorities have been quick to blame Bitcoin mining for the outages and have publicized police raids on illegal mining operations, but some experts think the government is simply searching for excuses for a long-decaying power grid.
In an interview with the Associated Press on Thursday, former deputy head of Iran’s Department of Environment Kaveh Madani said that Bitcoin was an “easy victim,” and that “decades” of administrative mismanagement are a more likely root cause.
Moreover, while retail mining may currently be acting as a scapegoat for the government, it’s clear that authorities aren't entirely turning their backs on cryptocurrency. As recently as last month Bitcoin was used to facilitate import payments from Venezuela.
While the relationship may be rocky at the moment, this certainly doesn’t appear to be the end of Bitcoin in Iran.