A recent study found that Iran is responsible for around 4.5 per cent of all bitcoin mining in the world. Photo / AP
A recent study found that Iran is responsible for around 4.5 per cent of all bitcoin mining in the world. Photo / AP
Just one week after China cracked down hard on cryptocurrencies — sending prices of the digital coins diving across the board — Iran has brought in tough new measures against them.
The government in the hardline Islamic nation of 82.91 million people blamed the digital coins for the major blackoutsacross the nation — saying the energy-intensive mining process used to create them was the reason.
A recent study found that Iran is responsible for around 4.5 per cent of all bitcoin mining in the world, creating close to US$1 billion ($1.4b) of the asset a year.
However, the nation has had enough. Iran's President Hassan Rouhani overnight announced a four-month ban on all cryptocurrency mining, a day after his energy minister apologised for unplanned power cuts in major cities.
Iranian officials have regularly blamed unlicensed cryptocurrency miners for using vast amounts of electricity.
Coinbase data shows the market is up 6.46 per cent today — with the biggest players bitcoin (up 3.52 per cent) and Ethereum (up 10.61 per cent) still bouncing back from last week's crash.
Why has Iran cracked down now?
Iran says crypto mining has wreaked havoc on its power grid in recent days.
Power cuts in the peak summer months are not uncommon in Iran, but Tehran and several other major cities were hit by unplanned blackouts late last week, sparking complaints from consumers and businesses.
Iran started rolling blackouts from Sunday to reduce the pressure on the national grid.
Rouhani said "illegal" miners who usually have access to subsidised electricity consume between six and seven times more power than those with permits.
Energy Minister Reza Ardakanian apologised to Iranians on Tuesday for "shortcomings and pressures" over the surprise blackouts.
He said the national grid was overburdened due to a drought impacting hydropower generation and unexpectedly warm weather causing a surge in demand for air conditioning.
National electricity company spokesman Mostafa Rajabi Mashhadi said on Saturday that licensed cryptocurrency-mining farms had already voluntarily shut down operations to ease the burden.
Profitably mining bitcoin and other cryptocurrencies requires masses of computers dedicated to solving equations - an endeavour that globally consumes more electricity than entire nations. Photo / AP
Profitably creating, or mining, bitcoin and other cryptocurrencies requires masses of computers dedicated to solving deliberately complicated equations — an endeavour that globally consumes more electricity than entire nations.
According to consultant and expert on cryptocurrencies Michel Rauchs, about 5-10 per cent of world bitcoin mining can be traced to Iran.
What did China do?
China's ban last week means that institutions there, including banks and online payments channels, must not offer clients any service involving cryptocurrency.
"Recently, cryptocurrency prices have skyrocketed and plummeted, and speculative trading of cryptocurrency has rebounded, seriously infringing on the safety of people's property and disrupting the normal economic and financial order," three industry bodies said in a joint statement on Tuesday.
The institutions must not provide saving, trust or pledging services of cryptocurrency, nor issue financial product related to cryptocurrency, the statement also said.
Beijing has not barred individuals from holding cryptocurrencies, but warned about the risks of cryptocurrency trading.
