Despite the cabinet’s resolution, the cryptocurrency mining industry lacks a precise and practical framework, leaving stakeholders uncertain and disheartened about investments and the future of mining.
6,500 Billion Tomans at Risk
Although officials and those with a more forward-looking view of emerging technologies like blockchain and Bitcoin believe digital currencies could provide new opportunities for Iran, efforts to regulate this sector, as reflected in several resolutions, have largely resulted in restrictions on cryptocurrencies. This has driven investment away from the industry in Iran. A prime example is the mining sector, which, despite the cabinet’s approval, still lacks a clear and executable mechanism, causing confusion and discouragement among industry participants regarding their investments and the future of mining in the country.
Cryptocurrency mining in Iran was officially permitted in August 2019 through a resolution by the 12th government’s cabinet, requiring a license from the Ministry of Industry, Mines, and Trade. At the time, it was determined that the electricity tariff for mining would be set at the average Rial price of exported electricity, determined by the Ministry of Energy. The gas fuel tariff was also set at 70% of the average Rial price of exported gas. Additionally, mining activity was prohibited during peak consumption periods. In October 2020, following a joint proposal from the Ministry of Energy and the Central Bank, the cabinet added a provision stating that mined cryptocurrencies could only be traded to provide foreign currency for imports, following regulations set by the Central Bank. Later, in November 2022, under the 13th government, the cabinet approved a new regulation to organize cryptocurrency mining, although the prohibition on using cryptocurrencies for domestic transactions remained in place. Despite these regulations, mining industry stakeholders recently warned in a press conference about the risk of capital flight amounting to 65 trillion rials due to the lack of implementation of the approved laws. They expressed concerns about potential investment loss and emphasized that the quick execution of responsibilities assigned to ministries and agencies in previous resolutions is essential to address the current situation.
Omid Alavi, Chairman of the Blockchain Association, highlighted the challenges faced by the mining industry in an interview with Cryptocurrency Assets. He explained that the mining industry received official approval four years ago, and miners began their operations. However, no mechanism was ever established for using the mined cryptocurrencies for imports. As a result, those who have been mining cryptocurrencies for the past four years could only hold onto their assets. Initially, this was satisfactory because the price of Bitcoin was rising, and miners were happy to wait. However, the delay has become problematic, as miners still cannot utilize their mined assets.
The Mining Industry is Stuck in a Vicious Cycle
Omid Alavi, Chairman of the Blockchain Association, discussed the current situation for cryptocurrency miners, saying that although there is a legal framework allowing the use of mined cryptocurrencies solely for imports, as per the government resolution, no clear mechanism for fulfilling the foreign exchange obligations created for miners in the most recent 2022 resolution has been established. As a result, even if miners successfully extract cryptocurrencies, they cannot use them, leading to a halt in new investments in the sector. Some miners have operated for a while, hoping they could eventually use their mined cryptocurrencies for imports, but their efforts have led nowhere. Previous investors are now questioning how long they must continue paying for electricity and labor while unable to sell their Bitcoins or conduct imports. It is estimated that nearly 65 trillion rials of national capital is tied up in this sector, but the mining industry is stuck in a destructive cycle that threatens its survival.
Regarding official and unofficial mining statistics, Alavi shared that 665 mining units have been established, with nearly 200 obtaining operating licenses. It is estimated that over 500 Bitcoins have been mined so far. However, there are no official statistics for illegal mining, although the numbers are likely significant. As more licensed miners shut down their operations, underground mining activities increase. Over 400 units are still awaiting their operating licenses despite having invested in land, buildings, cables, and mining equipment—capital that is now at risk of being lost if a solution isn’t found.
Alavi highlighted energy supply issues, explaining that miners are willing to purchase electricity through the Green Electricity Exchange, but the mechanisms have not yet been properly defined. While miners are open to paying fair prices for electricity, the pricing is not properly evaluated. For example, the Ministry of Energy set the electricity price at 3,000 tomans per kilowatt-hour in 2022 but later reduced it to 600 tomans in 2023. Alavi suggests that a reasonable profit margin should be calculated based on actual electricity production costs, and the tariff should be set accordingly—not arbitrarily raised just because Bitcoin prices have risen and mining is deemed more profitable. Such a move would only drive underground mining. The same issue applies to gas; the Ministry of Petroleum suddenly announced a gas price of 10,000 tomans for mining, while miners argue that anything above 6,000 tomans is unfeasible for the industry.
Gavin Andresen, a Bitcoin developer, once said, “Just as using email became easier over time, the use of Bitcoin will also increase as people invest in and become more familiar with it.”
Capital Flight to the Persian Gulf Countries
Neighboring countries, particularly those in the Persian Gulf, have made cryptocurrency activities and mining easier, in contrast to Iran’s restrictive regulations, which could lead to miners relocating. Omid Alavi commented on this issue, stating, “This is already happening. Many investors working in the Gulf region are Iranian, with their investments exceeding $2 billion. This investment could have taken place within Iran, boosting the country’s power industry, but unfortunately, it didn’t happen because our policies are not developmental—they are restrictive and destructive. Many Iranian investors are now mining in countries like the UAE, Kuwait, Oman, and Bahrain, where costs are lower, conditions are better, and there is more support.”
When asked if he supports the mandate that requires miners to use cryptocurrencies for imports, Alavi responded, “In other countries, there is no restriction on how extracted cryptocurrencies can be used; the free market dictates their use. However, cryptocurrency use is limited to imports in our country, and domestic transactions are prohibited. Despite this restrictive policy, which has already failed, around 10 million Iranians have wallets, and several trillion tomans worth of cryptocurrency transactions are made daily. Even Bitcoin produced domestically could meet the country’s cryptocurrency needs. Part of the cryptocurrency supply is handled through remittances, causing the currency to leave the country. We could have prevented this by encouraging investors to buy Bitcoin mined domestically.”
Alavi continued, “If Bitcoin is allowed for imports, we could carve out a role in the national economy. Even under current conditions, we manage to secure $1 billion annually. To increase that figure to $6 billion, electricity tariffs must be lowered to help the industry grow. We don’t need to allocate all the electricity to mining, but when a sector can offer quick returns, why delay its development? What options do you have if you’re looking for ways to increase the supply of foreign currency? You could build a petrochemical plant or a steel factory, but both are technologically complex and time-consuming. It takes at least five to seven years to establish a petrochemical or steel factory and even longer to begin exports, which come with challenges due to sanctions. In contrast, the cryptocurrency mining industry can be up and running in just six months. Given these circumstances, why shouldn’t this industry be supported? With the help of the mining sector, we could achieve significant results. Allocating 2,000 megawatts to mining could improve the renewable energy sector and the power grid while also helping to increase foreign currency reserves.” In conclusion, Alavi emphasized that the first step is for the Ministry of Industry, Ministry of Economy, and Central Bank to quickly finalize the mechanism for meeting foreign exchange obligations and clarify the process for using cryptocurrency in imports so miners can proceed with importing goods.
The Main Issue of the Mining Industry: Energy Tariffs
However, the head of the Blockchain and Cryptocurrency Commission of the Computer Guild has a different opinion. He believes that the problem with mining is not merely where the extracted currency is used, but fundamentally, that the extraction tariffs are problematic.
Afshin Ashouri: “The main issue with cryptocurrency mining is not whether we are mining officially or unofficially, as unofficial mining is already happening. The primary concern in this industry is the energy tariff. The main consumption of this industry is electricity, and we believe that if the cost of extraction exceeds three cents, mining is not viable. Due to technological changes, mining equipment must be updated every two years. Therefore, the main issue with mining is the cost of electricity, whether from self-sustained renewable energy or the power distribution grid.”
He added that the current cost of electricity and gas for the mining industry is unreasonable and lacks justification. “When digital currency is mined, the Central Bank can use this currency for imports, or individuals can use digital currency as the source of their currency, and eventually, a way will be found to utilize this currency. Does anyone even keep the mined cryptocurrency? Can expenses allow for that? When the production cost is higher than the expenses, it is necessary to sell immediately and cover electricity and gas costs. In these conditions, mining is not sensible; instead, one can buy and sell Bitcoin through foreign exchanges. Is Bitcoin only mined in Iran? In the mining industry, the cost of electricity, whether from self-sustaining plants or renewable sources, should not exceed three cents. If the government’s policy is to raise this cost to eight or nine cents, it does not make sense for the miner, which is why the mining industry has not developed during this time.”
“Currencies are evolving and reflecting societal progress. Digital currencies, data, skills, time, and social capital are reflections of a new paradigm. Learn and use them, as success in the modern world requires this broader understanding.”
The Mining Process Has Already Become Underground
The head of the Blockchain and Cryptocurrency Commission of the Computer Guild stated that high energy tariffs have already made mining underground and illegal in Iran. He said, “If the cost of legal operations is high and the cost of illegal work is low, people will turn to illegal work. Currently, the issue of energy costs for specialized units and areas—meaning large-scale operations—has been overlooked, and the discussion about importing with cryptocurrency has been neglected. In a situation where the cost of legal extraction is not viable for miners, what currency are they supposed to use for imports? The energy cost for mining in Iran is based on the average export price, which does not benefit miners. Renewable energy prices also do not benefit the mining industry because steel companies buy renewable energy for over 1,000 tomans during off-peak times and 3,000 tomans during peak times. In such conditions, priority will go to steel companies, and cryptocurrency companies will not receive energy.”
Ashouri noted that if an industry does not develop, it faces extinction. He emphasized, “In other countries, electricity is offered to the mining industry at three cents per kilowatt-hour. If Iran does not want to provide electricity at such rates, the mining industry will shut down, and there will be no future for it in Iran. A business and industry that does not maintain production continuity is useless, and continuing the current trend will lead to the mining industry’s demise.”
