From the invention of the digital currency Bitcoin in 2008 until recent time, the legal status of this controversial crypto-currency in Iran has been very unclear. However, the legislation that the Council of Ministers passed in 2019 which states that this currency is allowed on the condition that the user accepts all the risk has made the situation clear and the Iranian Bitcoin market is finally ready for business.
The Iranian social media shows that there is a great interest to Bitcoin among the Iranian people. The main reason for this interest may be that Bitcoin enables Iran to again trade with the rest of the world and also provides an escape from the instability of the Iranian Rial.
Bitcoin is also an industry in state of growth. From this year, students of contemporary feqh at the Islamic Seminary in Qom will even have opportunity to study the status of Bitcoin from the Islamic legal perspective.
The mining of Bitcoin uses complicated mathematical equations that consume large amounts electricity. The miner who solves the equation quicker takes a specific amount of Bitcoin reward and the completed transaction is added to the ‘block chain’.
In light of the large amount electricity that is required for the mining process, the Thermal Power Plant Holding Company (TPPHC) has announced a scheme to use the power production of three power plants for Bitcoin mining. Mohsen Tarztalab the managing director of the THHPC, says that the country’s economic situation due to the sanctions has become catastrophic and it is thought that the beginning of the THHPC Bitcoin scheme can reverse the problem of the reduction of the profit of Iran’s energy industry. Iranian ministers last year estimated that Bitcoin mining may bring profit of up to $8.5b.
Until now the atractive environment for miners in Iran has brought good results for the country. In July 2020 at the same time as an increase of investment in the country, the Ministry of Industry, Mining and Trade announced that it issued 14 Bitcoin mining licenses to foreign companies. Earlier this year however it has become mandatory to hold a license to extract Bitcoin in Iran. The miners must announce details of their extraction equipments and their activity when they request a license. A report that was published in January 2019 confirmed that at that time more than 100 mining companies were successful to get the license.
The electricity that is required for the Bitcoin mining process will come from increasing the number of turbines at three natural gas power stations. After a short time it will become clear whether the mining of Bitcoin will cause electricity shortages for companies and houses in Iran. However profitable the extraction of Bitcoin may be to some individuals it may have disastrous results for the whole country if it leads to power cuts.
Low electricity prices will also be an incentive for the Bitcoin miners of Iran. Mehr News Agency has reported that for miners the price of electricity is below 11 cents per kilowatt hour. At the peak electricity consumption times this number increases to 46 cents. Countries with inexpensive electricity will be more attractive for Bitcoin mining operatoins and this could lead to competition between some countries to provide electricity at the lowest possible price try to attract the highest number of miners from around the world. It is also possible that Iran will try to atract some of China’s miners who are about 65% of the hash power of the world.
Although the Iranian Bitcoin industry is now ready for business and has the possibility to be very profitable , it will be a challenge to compete with China’s very high hash power and to make certain that it does not damage the domestic power supply network.