After approving cryptocurrency mining, will Iran become the world's "mining paradise"?

Iran, which has always been harsh on cryptocurrencies, has suddenly changed its attitude.

On July 22, the Iranian Chamber of Industry, Mining and Agriculture announced that the Iranian government's economic committee has approved the establishment of a cryptocurrency mining mechanism. Some believe that following last year's mining disaster, this new policy will make Iran a "mining paradise" again.

Previously, despite the temptation of electricity prices as low as 4 cents, the miners migrating to Iran faced numerous challenges, including supervision, customs, and local tyrants. Every step could cause the miners to lose all their money.

Now that Iran’s regulatory attitude has changed, will the migration of the mining army to Iran become smoother?

Lao He, who has been doing business in Iran for many years, told 31QU that the future of mining in Iran may not be as smooth as expected; but if you have connections, investment, and become a "regular soldier", then mining in Iran has long been a profitable business.

A flawed mining paradise

As early as November last year, there were reports that miners were migrating to Iran to mine.

At that time, the price of cryptocurrencies plummeted, "mining accidents" became increasingly severe, and "mining machines sold by pound" and "mining machines 70 yuan per pound" became hot topics. In a previous interview with 31QU, Shenyu, the founder of F2Pool and CEO of Cobo Wallet, said that this rumor was true, and most mining machines were sold to places with cheaper electricity costs, such as the Middle East.

An industry insider told 31QU that, more precisely, most of the mining machines were shipped to Iran. "In Iran, a second-hand T9 can still generate a profit of more than 3,000 yuan within a year, but in China it can only be eliminated at a loss."

At the same time, Bao Erye also announced on Weibo that he was "looking to purchase power stations worldwide." Three days later, he set his sights on the Middle East, "in a country in the Middle East, whose name cannot be disclosed for some reason, the price is 4 cents per kilowatt-hour."

Although some netizens speculated that the country that was inconvenient to disclose was Iran, more than a month later, Bao Erye declared, "I have only heard about mining in Iran. I have never been there in person, nor have I participated in any investment," and emphasized, "If you are worried about US sanctions, it is best not to go."

But it is an indisputable fact that miners have migrated to Iran. Low electricity prices are the eternal pursuit of the miners. Iran's electricity prices as low as 3 cents stimulate the nerves of every mine owner.

"In the second half of last year, miners began to pour into Iran on a large scale," Lao He, director of the Iran-China Group, told 31QU. The Iran-China Group is a national key project enterprise in Iran, located in a bonded area exempt from tariffs and income taxes. In 2018, they officially entered the cryptocurrency mining industry.

Unlike the "regular army" of the Iran-China group, there are many miners who form "guerrillas". At the end of last year, Coindesk also reported that Chinese miners were looking for mining opportunities in Iran. "In the past few months, (they) have set up companies in Iran to import mining machines." The interviewee believed that this was "done in secret" by people with a lot of power and money.

This trend continued until the flood season of Sichuan mining farms this year. As the price of coins rose, miners who migrated to Iran also joined the fierce battle for second-hand mining machines. According to media reports, because Iranian miners offered "generous" prices, domestic mining farms even had a "hard to find" situation when they were deployed during the flood season this year.

However, although electricity costs are low in Iran, there are still various unstable factors in mining in Iran, causing the migrating miners to lose all their money.

The first thing to be affected is supervision.

In the article "Mining in Iran, a thrilling "money game", 31QU has detailed the various challenges that a mining machine will face if it wants to operate safely in Iran.

The first is customs. “The first thing to do when the goods arrive at the port is to declare them. If you can’t pass this hurdle, there will be no problem with the rest,” the interviewee said. If the goods are not in compliance, the mining machines will be confiscated once they are inspected.

Previously, there was a rumor among miners that Iranian customs had confiscated at least 40,000 cryptocurrency mining machines of various models.

Secondly, partners suddenly change their minds. For example, local power companies suddenly raise prices, or even locals report mining machines because they make too much noise when running.

Today, Iran's official attitude towards mining has changed, and the Iranian government's economic committee has approved the establishment of a cryptocurrency mining mechanism. Will Iran become a mining paradise again?

From "Warning" to "Approval"

In the past two months, Iran has seen a dramatic shift in its attitude toward blockchain and cryptocurrency mining.

Previously, the Iranian government was not very friendly towards the large number of miners from China.

During the Dragon Boat Festival this year, Iran’s Deputy Energy Minister Homayoun Haeri said that Chinese crypto miners should pay electricity bills according to the export electricity price.

Mostafa Rajabi Mashhadi, deputy general manager of Iran's national grid dispatch, even explicitly stated that using the national grid for cryptocurrency mining is illegal.

On June 24, an official from Iran’s state-owned power generation and transmission company Tavanir warned that Iranian cryptocurrency miners could face power outages if the government finds them using electricity for mining.

Interestingly, three days later, photos of a mining facility inside a mosque in Iran went viral on social media.

“It’s because mosques get free energy in Iran that Iranians set up bitcoin mines in mosques,” Tavanir spokesperson Mahsa Alimardani explained.

The Iranian government is certainly not just talking big. Last month, they confiscated about 1,000 Bitcoin mining machines from two abandoned factories.

In fact, the Iranian authorities’ harsh attitude is understandable. In May this year, Iran’s electricity consumption increased by 7% year-on-year, and cryptocurrency mining was the main reason.

Mashadi said: "The production of each Bitcoin is equivalent to the annual consumption of 24 homes in Tehran, or the electricity consumption of one property for 24 years." Such a huge amount of electricity consumption is used in the cryptocurrency mining industry, which will of course be strictly supervised and cracked down by the government.

However, whether it is due to "livelihood pressure" or for the purpose of revitalizing the industry, the Iranian government's attitude has recently changed 180 degrees.

The shift can be traced back to July 10, when the governor of Iran’s Central Bank, Abdol Nasser Hemmati, said the Iranian government was planning to authorize cryptocurrency mining.

But at the same time he put forward two conditions. Simply put, the first condition is that Chinese miners must pay electricity bills according to the export electricity price; the second condition is that some of the Bitcoin income obtained from mining should be given to Iran.

Later, Mohammad Sharqi, managing director of the Blockchain Association, a nonprofit organization in Iran, said that Iran’s Ministry of Energy would be better off regulating digital currency mining by issuing industrial and commercial electricity licenses.

With increasing attention from all walks of life, on July 22, the Iranian Chamber of Industry, Mining and Agriculture announced that the Iranian government's economic committee has approved the establishment of a cryptocurrency mining mechanism in the country. This also marks that Iran officially recognizes cryptocurrency mining as a legal industry within its territory.

It is worth mentioning that the Iranian government itself has also set its sights on mining. On July 14, an official from the Iranian Chamber of Industry, Mining and Agriculture claimed that Iran will soon launch a gold-backed cryptocurrency that will be mined under the permission of the Central Bank of Iran.

Shahab Javanmardi, CEO of Iranian information and communication technology (ICT) company FANAP, said the cryptocurrency will be mined through a partnership between the Central Bank of Iran and a private IT company in the country. “Iran’s cryptocurrency is backed by gold, but its functionality is similar to that of its foreign competitors.”

Although Iran officially recognizes the legality of cryptocurrency mining, according to Jamal Arounaghi, deputy director of the Iranian Customs Administration (IRICA), only the tariff amount for cryptocurrency mining equipment has been determined, and the government has not issued a license for any imported cryptocurrency mining machines.

In any case, judging from the current situation, the Iranian government's attitude towards the cryptocurrency mining industry will certainly become more and more positive. The regulatory issues that Chinese miners are most worried about seem to have been guaranteed.

Iran’s mining “regular army”

Although top-level supervision has shown its attitude, various problems will still be encountered during the specific implementation process.

"The Iranian government's management is still relatively chaotic." Lao He told 31QU that getting things done in Iran still requires connections. Many miners have found connections of all sizes in the local area, such as power plants and large companies, but there are still risks in cooperative operations.

What's more, in the regulatory attitude that has been revealed, other conditions have been set for foreign mining companies: electricity bills must be paid according to export electricity prices, with no subsidies; the income from mined Bitcoins must be shared with Iran, which invisibly increases the cost of miners.

"But it's normal to have risks." Lao He believes, "Some people just like to take risks."

Compared with the miners who are still hesitating whether to migrate to the Middle East, Lao He's mine runs too smoothly: there are no customs issues, "we are in the bonded area and can come in legally"; there is no need to mine secretly, "there is no illegality, we have explained everything clearly to the government."

In fact, most of the mining machines in the mine are S9 and T9. "I don't pay attention to the new mining machines because they are too expensive." Lao He said frankly, "We don't need to use such expensive things. T9 is very good."

Currently, the company where Lao He works plans to build a super-large mining farm in Iran, with plans to operate 100,000 mining machines.

"The profits are quite good. A mining machine can pay back the investment in 40 to 50 days." Lao He told 31QU that the most important thing is the cheap electricity. "In China, electricity costs may account for 60% of the cost of a mining farm, but in Iran, the proportion may be less than 6%."

Lao He has always emphasized that they are a "regular army" of mining in Iran, but it is not easy to become a regular army. "We are a Chinese-funded enterprise that has been established in Iran for many years, with hundreds of millions of assets. We have also invested in Iran for many years and have a good relationship with the local people." Lao He told 31QU that to become a regular army, one must have strength and years of accumulation.

But for some miners who migrate around the world, this is a fairly high barrier.

In fact, fewer miners are going to Iran to mine now, and more miners are sharing the dividends of Sichuan's flood season. In the cryptocurrency ecosystem, senior miners are the most sensitive to risks and profits.

Text/ 31QU Xiaoke Murphy