Tehran, Iran – An Iranian newspaper this week shamed government authorities for letting cryptocurrency farms – especially those owned by the Chinese – mine Bitcoin in Iran.

“Burning down public trust is even more dangerous than burning people’s money in Chinese cryptocurrency farms,” ​​said Jomhouri-e Eslami’s editorial entitled “Red Farms!”

The allegations are not limited to one newspaper. For the past two weeks, Iranian social media, state-affiliated media and dozens of local and national officials have been grappling with crypto farms, their power consumption and the alleged role mining is playing in affecting the country’s air quality.

But members of the crypto community are crying badly, arguing that they are being scapegoated for Iran’s growing problems in battling the Middle East’s worst COVID-19 crisis and the crushing financial blow of the pandemic and United States economic sanctions.

Power outages and pollution

Crypto miners operate powerful “farms” of computer equipment that compete on a global, decentralized computer network to validate transactions in cryptocurrencies such as Bitcoin.

In return for checking “transaction blocks”, miners are rewarded with new coins.

The profits can look great. Known to be volatile, Bitcoin rose to an all-time high of just under $ 42,000 on January 8, but has since fallen to around $ 31,000.

But crypto mining requires a lot of electricity that is subsidized in Iran, fueling allegations that crypto miners are profiting at the expense of the state.

The recent backlash against crypto mining is due to the fact that the sprawling Iranian capital Tehran has been surrounded by heavy smog for almost a month [File: Majid Asgaripour/WANA (West Asia News Agency) via Reuters]Crypto proponents counter that these subsidies aren’t as generous for miners who are forced to shell out export rates for electricity and can pay ten times what other industries pay for electricity during peak months.

The government and the public have also blamed crypto miners for nationwide power outages since 2019.

This latest backlash is due to the fact that the sprawling Iranian capital, Tehran – which is home to more than eight million people and the number of commuters soaring to over 12 million – has been surrounded by heavy smog for almost a month that spread to other cities across the country Ireland has expanded land.

The deterioration in air quality has been attributed to power plants burning mazut, a heavy, low-quality heating oil that emits high levels of sulfur dioxide.

“We don’t want mazut to be consumed at all, but we have no other option,” admitted Oil Minister Bijan Zanganeh in early January. Iranian Mazut exports are affected by US sanctions against the country’s oil industry.

Breathing toxic emissions is a direct contributor to 3,000 deaths in Tehran and 33,000 across Iran, according to the latest estimates by the Ministry of Health in 2018.

According to Mojtaba Khaledi, a spokesman for the Iranian Emergency Services Organization, nearly 14,000 people across Iran were admitted to emergency rooms over a five-day period in December due to complications related to pollution.

Iran’s electricity grid is under strain that experts have attributed over the years to a number of fundamental issues, from mismanagement of power plants and old infrastructure that leads to energy wastage, to exceptionally high levels of natural gas consumption by households.

Earlier this week, President Hassan Rouhani said that Iran – which has the world’s second largest natural gas reserves – consumes more natural gas in colder climates combined than 14 European countries combined.

Tehran households are now also experiencing sporadic natural gas failures.

Crypto mining is currently the most cash-capable industry in Iran.

Hamed Salehi, researcher in cryptocurrency and blockchain technologies

Cash industry

According to official figures, Iran can currently produce up to 83,000 megawatts (MW) of electricity.

Although a number of officials have blamed cryptocurrency mining for the strain on the power grid, others have contradicted this claim.

Iranian Energy Minister Reza Ardakanian said Tuesday that the country’s electricity consumption is peaking at 38,000 MW per day, while total consumption for cryptocurrency mining is just over 300 MW

“A simple mathematical calculation will tell you what fraction of that huge number it is,” he told reporters, warning of factions who want to take this opportunity to sow unrest.

Cryptocurrency and blockchain technologies researcher Hamed Salehi said a lack of transparency by the Department of Energy in large crypto mining farms – including energy usage and the types of equipment used – leads to misinformation and creates a less welcoming climate Industry not under the yoke of US sanctions.

“What would be wrong with foreigners coming to Iran, getting all the official permits, and investing money to even build substations for them? [cryptocurrency mining] Farms? “He asked Al Jazeera, adding,” It would be of benefit to them, to the government and to the people. “

“Crypto mining is currently the most cashless industry in Iran that is sanctioned, while miners pay for their electricity at export prices,” Salehi said.

Although the Jomhouri-e Eslami editorial cracked down on “red farms,” there is only one crypto-mining farm in the country that is jointly owned by China, Mostfa Rajabi Mashhadi, spokesman for Iran’s energy industry, told state television last Week.

The farm in question is operated by the Iran & China Investment Development Group. On January 14, Iranian officials announced that they – along with a number of other Iranian crypto farms – would have the blackout for two weeks without prior notice.

Mohammad Hassan Ranjbar, CEO of Iran & China Investment Development Group, issued a statement condemning the move and media hype surrounding cryptocurrency mining.

“China is currently the only country that can invest in Iran due to sanctions. It is both tech rich and tech rich so we can create the reasons for more investment by helping each other, ”he wrote, warning that China could relocate its business to another country as bitcoin mining“ profitable anywhere in the world ”is his most recent assessment.

“They don’t even have to build substations, they are supported by governments and people and not sanctioned,” added Ranjbar.

China is currently the only country that can invest in Iran due to sanctions.

Mohammad Hassan Ranjbar, CEO of the Iran & China Investment Development Group

Crackdown on illegal mining

It’s not just crypto farms working overboard that are in the crosshairs.

President Rouhani’s chief of staff Mahmoud Vaezi, who previously served as Minister of Information and Communication Technology for four years, announced earlier this week that the Ministry of Intelligence will begin investigating illegal cryptocurrency mining operations.

“It would also be wrong to say that the government uses Bitcorn,” he said, mispronouncing the name of the largest cryptocurrency in the world.

Mohammad Hassan Motevalizadeh, CEO of the state-owned utility company Tavanir, said this week that 45,000 illegal mining equipment at 100 MW per day was recently seized.

It is estimated that illegal devices that were not trapped in the dragnet use up to 300 MW per day, or less than one percent of Iran’s peak electricity consumption.

It would be futile to say that cryptocurrency mining is causing power outages in Iran, with all evidence to the contrary, said a 30-year-old who runs a legal farm of nearly 1,000 devices and wanted to remain anonymous because of the sensitivities involved.

“The solution to power outages would be for officials and the Department of Energy to develop infrastructures and methods of power supply during peak hours,” he told Al Jazeera, adding that the expansion of solar and wind power plants would be a promising path.

“I agree that illegal farms should be treated,” said the researcher Salehi.

“This signals foreigners not to come to Iran because something like this could happen to them at any moment. And it falsely tells people that crypto mining is for profiteers who waste public resources. “

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