Bitcoin

Bitcoin Fever Grips Iran Due to Crumbling Economy

The Iranian authorities seem to have their hands full with the aftermath of the sanctions slammed by the United States. According to a news report as a result of those sanctions, Iranians have turned towards bitcoin mining.

Iranians are feeling the squeeze from the U.S. sanctions, and with the country’s struggling economy, digital currencies such as bitcoin come as a way of side stepping the suffocating sanctions. With bitcoin, comes the intensive bitcoin mining, according to Iran’s minister for information and communications technology, Mohammad Javad Azari Jahromi’s interview with the Associated Press:

It is clear that here has turned into a heaven for ‘miners’.

 Mining is an integral part of the bitcoin ecosystem. As opposed to the traditional fiat currency, bitcoin and other digital currencies are not controlled by a central bank and are traded globally in various markets. In order to carry out the process, computers around the globe “mine” the data. In easy words, they use complex algorithms to verify transactions.

Only last month, the President of the United States Donald J. Trump announced that he was imposing new sanctions on Iran, which bar some of the top officials of the nation from making use of any international banking system or any financial vehicles set up by other countries. The newest sanctions by President Trump follow Tehran’s declaration of amassing more nuclear fuel, which immensely fueled the rising concerns, regarding the Islamic nation.

Trump was very clear in his intent on wringing the nation dry, economically speaking. Especially with the latest clampdown on oil exports of Iran, considered a staple in the country’s exports. Washington even requires several other importing countries to reduce purchases in order to avoid infringing U.S. sanctions.

READ ALSO: Can’t Shutdown Cryptos – U.S. Foes Using Cryptos to Evade Sanctions

The thing that concerns several people about mining is that it is an energy intensive project. The specialized computers are rather expensive and require quite a lot of electricity to power their processors all the while keeping them cool. However, reports suggest that miners in Iran have it easy since the electricity is cheap because of government subsidies. As for the expensive computers, reportedly miners buy cheaper Chinese ready-made computers. That explains why Iranians are so interested into bitcoin mining.

However authorities of the country are concerned that such an energy intensive process is abusing the subsidized electricity. Hence there have been talks about boosting the electricity cost for bitcoin miners. Only earlier this month Ali Bakhshi, the head of the Iran Electrical Industry Syndicate, said that Iran’s Energy Ministry is likely to boost costs for miners from half a cent to 7 cents for each kilowatt of electricity they consume, that is  considered a massive increase.

Jarhomi further told AP that the business of mining isn’t forbidden by the Iranian law however, the government and the Central Bank have ordered the Customs Bureau to ban the import of (mining machines) until new regulations are introduced. He remarked;

Cybercurrencies are effective in bypassing sanctions when it comes to small transactions, but we do not see any special impact in them as far as mega-transactions are concerned. We cannot use them to go around international monetary mechanisms.

READ ALSO: U.S. Preventing Iran’s Access to Cryptos and Bitcoin Mining

Other than mining, the authorities are also concerned that locals might be using them to convert the rapidly devaluing rial into other currencies. The Iranian rial has tumbled drastically from 32,000 rials to $1 at the time of the 2015 nuclear deal, to around 120,000 rials to $1 now.

Then there are also concerns that are almost always attached to bitcoin, that it’ll be used to hide or move illicit money. Which is only one part of the problem that the country has with bitcoin and other cryptocurrencies. Another ongoing debacle is whether it is halal (permissible) in Islam or not.

Bitcoin Mining Halal or Haram According to Country’s Religion?

There have been several rulings in various Muslim countries about this. Several Muslim leaders and scholars have declared it as haram (forbidden) in Islam as Islamic finance prohibits gambling and the payment of interest. Plus the money needs to be backed by something of value like gold for example and bitcoin isn’t backed by anything. Jarhomi said:

Some of our top clerics have issued fatwas that say Bitcoin is money without a reserve, that it is rejected by Islamic and cybercurrencies are haram. When we explain to them this is not a currency but an asset, they change their mind.

Reportedly Iranian authorities have intensified their mining crackdown this summer, confiscating about 1,000 units of mining machines from two now-defunct factories and cutting off power to miners ahead of the planned energy price hike.

READ ALSO: Bitcoin Mining is Not Hazardous to Environment Anymore

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Abeer Anwaar

Abeer holds a Bachelors degree in Media studies and covers blockchain startups for BlockPublisher. An optimist, excels in the art of the written word and swears by the joy of all things sweet. Contact the editor at editor.startups@blockpublisher.com

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