Iran Issues Operating Licenses to Over 1,000 Cryptocurrency Miners

The Iranian government has reportedly issued more than 1,000 licenses to cryptocurrency miners in the country ever since it started to regulate the industry last year. According to local media reports, the licenses the licenses were issued by the country’s Ministry of Industry, Mine, and Trade.

An official with Iran’s ICT Guild Organization – an Iranian NGO representing information and communications technology (ICT) sector – Amir Hossein Saeedi Naeini revealed the state of the country’s cryptocurrency mining industry, local Financial Tribune reported Friday.

In an interview with the Ibena publication, he stated that cryptocurrency mining is a new industry but miners have been attracted to it in Iran due to low electricity costs. According to data, miners are charged $0.11 for one kilowatt-hour (kWh) of energy, whilst during the peak summer season (June to September) the charges are higher at $0.46 per kWh.

Previously, the government accused crypto miners for using subsidized power after getting ahold of approximately 1,000 bitcoin mining machines in two abandoned factories allegedly using government-subsidized electricity.

Following that, the government issued a directive and is now providing electricity to them at the export rate, citing that subsidized energy put pressure on Iran’s national grid, causing a 7% increase in energy consumption in the country. This, in turn, significantly raised the operating cost of digital currency mining businesses in the country.

“The electricity price offered to miners will be equal to the average Rial price at which Iran exports its electricity to other nations, or to 70% of the average Rial price at which the country ships off its natural gas,” according to a directive from the government.

In the meantime, Amir Hossein Saeedi Naeini stated that studies have shown that the crypto mining industry had the potential to add $8.5 billion to the economy of the country. However, he further explained that the cost of electricity was a major challenge for crypto miners in Iran.

Whilst a number of large and industrial farming mines have already been set up, the high electricity tariffs plus stringent regulations have made the sector less appealing for small investors. As such, few licensed mining farms are currently active in Iran. He then suggested that making changes to the electricity rates could help boost the crypto mining industry by allowing all miners to operate, and it could also help generate more revenue.

Due to the criticism from the ICT Guild Organization regarding the high tariffs, the government has responded and stated that discussions are underway to set more favorable terms for crypto miners.

Meanwhile, the Iranian government officially recognized cryptocurrency mining as an industry only in August 2019 after months of deliberation. Notably, Iran does not recognize cryptocurrencies as legal tender. Iranian President Hassan Rouhani has also been discussing creating a unified cryptocurrency for Muslim countries with leaders of other Muslim nations.

Iran Rumored to Launch its Own Rial-Backed Cryptocurrency to Circumvent Sanctions

According to local news, Iran could possibly reveal its state-backed cryptocurrency at a conference in Tehran this week. Excluded from the global financial system, Iran has previously planned to use blockchain based financial tools as a way to bypass restrictions on its economic growth, which had been imposed by the United States.

The virtual currency is anticipated to be announced at the annual two-day Electronic Banking and Payment Systems conference, which starts on January 29 in Tehran. The theme of this year’s gathering is “blockchain revolution”.

The biggest blow to Iran’s economy came in November, when some of its banks were barred from SWIFT, the Belgian-based global messaging system that facilitates cross-border payments. Countries excluded from SWIFT cannot pay for imports or receive payments for exports, leaving them crippled financially, and having to rely on alternative methods of transferring money.

It was anticipated that Tehran would forge an alternative to SWIFT through a central bank-issued digital currency (CBDC), which could be a rial-backed crypto. Iran’s cryptocurrency is expected to be rolled out in phases. First as a rial-backed digital token, which will facilitate payments between Iranian banks and other Iranian institutions active in the crypto space, and eventually as a tool for the Iranian public to pay for local goods and services.

Whilst it would not directly facilitate payments between Iran and other countries, the state-backed digital currency could lay the groundwork for Iran to join a blockchain-based international payments system that could develop as an alternative to SWIFT.

Sources remain unsure whether such a large-scale implementation will take place, however more localized uses for the digital currency, such as consumer payments, are most likely to come to materialization.

Meanwhile, Iran signed a trilateral blockchain cooperation agreement with Russia and Armenia, at the ChainPoint 18 conference in Armenia on November 14th of last year.

Following this, the Russian signatory Yuri Pripachkin, head of the Russian Association of Cryptoindustry and Blockchain, had disclosed that “according to our information, an active development of an Iranian version of SWIFT is currently under way.”

Iran is not the first government to attempt to co-opt the crypto space to help its ailing economy.

Venezuela launched a controversial, state-backed cryptocurrency, the petro, last year. However, the Trump administration banned trade in the Venezuelan petro. Russia’s project, the crypto ruble, is still several years away from release according to government officials.

That being said, U.S. lawmakers warned they would also sanction any form of the crypto-rial.

Despite the many hurdles that the Iran’s digital currency faces, some of the country’s crypto enthusiasts believe the government’s adoption of blockchain could create a more productive and fruitful environment for the region.

Bitcoin’s Price Spikes On Local Exchanges In Iran

Most recently, Iran has announced their decision that from now cryptocurrency mining will be recognized as a separate industry. This has come to light as a consequence of intense pressure of the economy after having implemented monetary sanctions enforced by the USA.

Subsequently, the Central Bank of Iran, which regulates Iranian foreign exchanges and monetary policies, has already started working on drafting new policies regarding this new development. Meanwhile, the secretary of Iran’s Supreme Council of Cyberspace, Abolhassan Firouzabadi, has announced that the new policy is set to be drafted over the next three weeks. In a statement to IBENA, he cites that this new development is a promising change within the Iranian market as it will strengthen Iran’s relations with trade partners and allied countries. Moreover he has pointed out that the new cryptocurrency industry has already been recognized by many governmental branches and authorities such as the Central Bank, Ministry of Communications and Information Technology, Ministry of Industry, Mining and Trade, Ministry of Energy and the Ministry of Economic Affairs and Finance.

In the meantime, the price of Bitcoin was circa $24 000 (converted) on some of the Iranian exchanges. Exir, an exchange platform, has indicated a fee of 1,020,000,000 IRR for 1(one) Bitcoin, surpassing by far its previous highest value of $20 000. Currently, the price of BTC on international exchanges is $7000. The price of Ethereum has also been inflated as a result of the news breaking out, rising to $900, whilst it currently trading at the price of $280.

U.S. Sanctions Leads To Economic Destabilization

After the sanctions imposed by the USA came into effect this August, the Iranian Rial has drastically fallen in value in comparison to the US dollar, thus causing dissidence for many as this has pushed many European markets to remove themselves from the Iranian economic platform. President Donald Trump was very absolute and definitive about his decision, this leading to a lot of countries having to choose between Iran and the US.

Solely the announcement of said sanctions has forced more than 100 companies to withdraw from the Iranian market immediately, as the situation in the country becomes uncertain and precarious due to the riots and protests of the people. Since then, the Rial has continually decreased in value, forcing the Rial on the verge of hyperinflation. Venezuela is another instance when a country is being torn apart by the political instability and hyperinflation therefore takes the decision to combat this by turning to virtual currencies such as Bitcoin or DASH.