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Here’s the latest chapter in Iran’s clampdown on crypto-miners

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The crypto-community of Iran has shared its opposition to the reinstated seasonal limit on cryptocurrency mining. Despite being aware of the potential of cryptocurrencies as a way to avoid international sanctions, the government is once again limiting crypto-mining operations to reduce the burden on the nation’s power supply.

According to reports, 118 government-approved mining firms in Iran no longer have access to electricity  due to seasonal increases in demand. This decision was made by Mostafa Rajabi Mashhadi, a spokesman for Iran’s power sector.

After having to deal with many power disruptions last year, the Iran Power Generation, Transmission, and Distribution Company (Tavanir) has ordered cryptocurrency miners to halt operations once more until the end of this summer. The utility company is blaming projected electricity constraints for the anticipated three months of hot weather when demand would rise due to rising cooling consumption.

Power deficit and frequent blackouts due to crypto-mining

According to Mostafa Rajabi Mashhadi, this step will lower excessive demand on the national grid during the peak season. The move has been criticized by stakeholders, however, who believe it is unjustified and will harm Iran’s cryptocurrency mining industry.

The sustained use of power for mining, both legal and illicit, was largely blamed for the power shortage and frequent blackouts. To help with the energy shortages in the chilly winter months, when demand for energy increases for heating purposes, they were once more instructed to unplug their equipment after being permitted to restart operations for a while.

According to the Cambridge Centre for Alternative Finance’s Bitcoin Mining Map, Iran’s share of the world’s hashrate dropped to just 0.12% as a result of shutdowns last year. This effectively drove Iran out of the cryptocurrency mining business. Similar events have now prompted various responses from the outside world as well as warnings that Iran is falling behind its rivals.

Crypto-mining boom – The full picture

Before the prohibitions, cryptocurrency mining in Iran was growing. In May 2021, blockchain analytics company Elliptic calculated that 4.5% of all Bitcoin mining occurred in the nation. According to the Cambridge Centre for Alternative Finance, that percentage dropped to 0.12% in January.

Since legal mining operations only make up a minor portion of the network’s load, some Iranians think that eliminating crypto-miners from the picture would have minimal impact on the power supply. The effectiveness of the prohibition on allowed mining is not yet obvious, according to the report.

Iran isn’t alone in facing these issues, however. Between July and August 2021, China registered its lowest crypto hashrate ever as a result of the country’s most severe crackdown on crypto-mining. The crypto hashrate quantifies the computational power utilized by proof-of-work cryptocurrencies like Bitcoin.

However, it seems as though the sector has quickly recovered since. In China, underground mining has taken root. Only time will tell whether the same happens in Iran.

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Jibin Mathew George is Editor-in-Chief at AMBCrypto. A domain expert in International Relations (European Politics), he has always been a believer in the unlimited possibilities afforded by blockchain and by extension, cryptocurrencies. As someone who has been watching and writing about this space for over 5 years now, Jibin has closely tracked the emergence of cryptos and digital assets as a separate asset class in portfolios world over. A lawyer by training, he previously contributed to the News and Research desk of Diplomacy & Beyond Plus. Before his stint at D&B, he was Editor at ED Times. Jibin also takes a great interest in politics, especially the corresponding effect political decisions and fiscal policy have on the world of finance, with a special focus on cryptocurrencies.
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