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Heaven for Bitcoin Miners? Iran Officially Legalizes Crypto Mining

The Iran Chamber of Commerce, Industries, Mines and Agriculture recently published a statement that the Iranian Economic Commission has approved a mechanism for digital coin mining. This is in line with Iranian internal laws that facilitate the growth of mining firms across the country.

Crypto mining in Iran is gaining popularity with its cheap electricity prices. The Iranian Economic Commission has finalized a tariff scheme for cryptocurrency miners, in which the electricity costs for crypto mining are similar to the tariffs used for electricity exports. Energy Minister Homayoon Ha’eri said the finalized tariff scheme is subject to the approval from the Iranian cabinet. While the exact price scheme is not specified, Ha’eri believed that the price is subject to market factors such as the fuel prices in the Persian Gulf.

The governor of Central Bank of Iran Abdolnaser Hemmati shared a similar view with Ha’eri and suggested two main conditions for the legalization of crypto mining: crypto mining should be based on the price of electricity exports and mined cryptocurrencies should be circulated within the Iranian economy.

The rate of Iranian electricity export to neighboring countries ranges from $0.7 to $0.10 per kilowatt-hour. However, Bitcoin miners are enjoying subsidized electricity at $0.05 per watt, and it is the same rate as industrial and agricultural operations.

117 Smuggled Crypto Mining Machines Seized by Iranian Police

Following the wake of the Iranian government in the authorization of cryptocurrency mining as industrial activity in July, the Iranian provincial police had apprehended an individual who was said to be smuggling in cryptocurrency mining machines. This was reported by the local news agency Fars News, on July 31.

The mining machines which were said to have been seized by the Saveh Police Department’s Anti-Trafficking Police were retrieved from the driver of the truck. It was alleged that the truck was carrying 117 cryptocurrency mining machines which are worth 11.7 billion Iranian rials (approximately $277,876 at press time).

Complications of crypto mining in the regulated territory

Knowing that earlier on, the Iranian government had authorized the mining of cryptocurrencies within the region as an industrial activity, it would be expected henceforth that entities who are engaged in cryptocurrency mining would be required to seek a license from Iran’s Ministry of Industry, Mine and Trade.

An electricity pricing scheme for crypto miners had already been arranged by the Iranian Economic Commission. Although Energy Minister Homayoon Ha’eri did not state elaborately the exact price schemes, he stated the price was going to be dependent on factors such as fuel prices, in the Arabian Gulf.

Belt and Road Summit 2019—Iranian Investment, Malaysian FinTech and the Kazakh Belt Buckle

Rounding off our exclusive interviews for the 2019 Belt and Road Summit, jointly organized by the Hong Kong Trade and Distribution Council (HKTDC) and the HKSAR Government, we share three brief insights from Reza Esmkhani, Consul of Economic & Political Affairs, Iran Consulate General; Miss Noor Ezzwanee binti Ahmad, Trade Commissioner of Consulate General of Malaysia; and, Diana Ablyakimova, Brand Manager of Invest Kazakhstan.IranAs reported by the Arab News, at the conception of China’s Belt and Road Initiative (BRI), there were few details regarding the participation of Gulf and Middle Eastern countries, possibly due to the prevailing confrontations and conflict. The only countries from the region identified in the BRI were Turkey and Iran which are both located directly on the Eurasian land routes.

Relationship MattersThe Consulate General of the Islamic Republic of Iran has a duty to preserve its national interests and fostering a continued trade partnership with China and Hong Kong is clearly in the Iran’s interests. Esmkhani highlighted, “China is our biggest trading partner with a volume of over $30 billion U.S. dollars, and Iran and Hong Kong also have an annual trade relationship that sits at around $500 million U.S. dollars.”

Iran is a founding member and major stakeholder of the Asian Infrastructure Investment Bank (AIIB) and has worked in collaboration with the Islamic Republic on several infrastructure projects. Despite this history with the AIIB, Esmkhani feels, “The AIIB should play a bigger role in Iran, especially as Iran was part of the original silk road. When looking at comparisons between our nation and say the investment of the bank in Pakistan, it is a little disappointing and we are eager to receive some RMB funding.”

When asked about the most attractive opportunities for international investment in Iran, Esmkhani outlined, “Iran is one of the largest economies in the region and the 18th largest economy in the world with a population of 82 million—the market opportunities are vast for companies eager to invest and produces commodities in Iran. Labor costs are low and Iran is very safe in the region.” He continued, “The Iranian economy holds a large capacity for investment in infrastructure, tourism, mining, in petrochemicals and oil, even in car production.”

Esmkhani sees the Belt and Road Initiative as an alternative to US unilateralism in trade, commenting, “Giving a greater role to RMB trade and also having greater trade relations between our regions can be leveraged to decrease the bad effects of this unilateralism and this trade war. The Belt and Road initiative is a perfect platform to increase our opportunities and create more win-win trade situations.”

Malaysia

Malaysia has benefited a lot under the Asian Infrastructure Investment Bank (AIIB)—which is directly linked to various organizations, companies and infrastructure projects along the Belt and Road. Ahmad stated that creating links between the AIIB and projects within Malaysia is a major function of the Consulate General.

On Malaysian sectors that have received international and Chinese interest, Ahmad said, “From our observations, there has been a lot of property investment coming from China and Hong Kong particularly in commercial and residential property development. Of course, a lot of Chinese companies and other ASEAN countries are looking to move manufacturing production to countries in South East Asia like Malaysia.”

Malaysia is at the center of the ASEAN countries, and according to Ahmad, is set to be a hub for investors looking to break into the market of around 650 million people. Ahmad explained, “A lot of this will be traditional investment in manufacturing, but we are trying to promote investment in new technologies, such as aerospace, biotech, and automation.” Through the BRI, technological information is passed more freely through the participating countries, Ahmad said, “We will do technology exchanges and transfers with our partners in China and Hong Kong which empowers us to stay ahead and accelerate our technological development.”

Islamic FinTech

Malaysia is quickly developing and wants to present itself to the international market as an opportune place for the investment and development of new technologies. One area that Malaysia is breaking new ground is Islamic Financial Technology (FinTech) which has come about due to the majority Muslim population. Malaysia had produced around 26% of the Shariah-compliant financial assets by the end of 2017 and the market is expanding. Ahmad concluded, “Malaysia is a world leader in Islamic FinTech which we can share with other ASEAN and Belt and Road countries, which also tend to have high Muslim populations.”

Kazakhstan

The BRI adheres to the principle of wide consultation, joint contribution, and shared benefits, with the aim of injecting impetus into world economy and boosting the common development of all countries, against the backdrop of resurging trade protectionism and rising anti-globalization. Through the BRI cooperation, China and Kazakhstan have already seen positive outcomes—in 2018 along, the trade volume between the two countries reached $19.885 billion. Among this trade activity, Kazakh exports to China were worth $8.535 billion which marked a 30% increase from the previous year.

Diana Ablyakimova is the Brand Manager of Invest Kazakhstan, a one-stop-shop for foreign investors in Kazakhstan that provides a full range of services to support projects from conception to implementation through to post-investment—effectively supporting the whole life-cycle of the investment.

On the BRI, Ablyakimova said, “Kazakhstan has supported the initiative since the very first day. The historical Silk Road runs directly through our country, in fact, Kazakhstan has been coined the ‘belt buckle’ of the Belt and Road due to our geographic position.” She continued, “Currently around 70% of BRI land transit traffic goes through Kazakhstan which reduces transport times between China and Europe by 15 days. To go by sea from China to Europe can take up to 45 days so we are very strategically placed.”

Ablyakimova highlighted that China and Kazakhstan have developed a comprehensive strategic partnership, she said, “China is one of our top five investors—since the time we established our independence (1990), our country has received over $300 billion dollars of investments and of which China accounts for 5%.”

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Iran Government Offers Up To 20% Reward To Anyone Who Exposes Illicit Cryptocurrency Mining In The Country

As stated by a news report on October 13, Iran just offered a reward to anyone who exposes illicit cryptocurrency mining in the country. This proposition arose as a result of new regulations by regulators which stated that the rate of electricity used by miners of cryptocurrencies should be calculated. Hence, individuals, corporations and companies are meant to report non-compliance to the new rule as it is expected that all cryptocurrency miners in the country should not use subsidized electricity to mine cryptocurrencies like bitcoin.

In accordance with the report, a spokesman of Iran’s Energy Ministry, Mostafa Rajabi made the announcement in an interview, saying that anyone who reported defaulters would go home with up to 20% reward from the recovery of the damaged caused on the power sector by the said defaulters. As at press time, police had started hunting in places where the rate of electricity usage is subsidized.

The said spokesman claimed the new regulations that the activities of miners who use the national electricity distribution would be stopped during peak hours of usage which is roughly 300 hours per year.

More than three months ago, Iran launched a crackdown on illegal use of exorbitantly low electricity for miners of digital currency. And now, the new regulations have come to nail it.

Those who establish their own mining plants would receive incentives from the government and the national network would support plants that use renewable sources if they have a failure while attempting to generate power.

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Iranian President Advocates for Cryptocurrency-Driven Muslim Nations

During the first round-table discussion at the Kuala Lumpur (KL) Summit 2019, Hassan Rouhani, Iran’s President, proposed that cryptocurrency ought to be integrated into Muslim nations as this would smoothen trade.

He made the suggestion on Dec 19 as various nations converged at Kuala Lumpur, Malaysia, to delve into solutions and proposals that are workable and acceptable for the Muslim World.

Rouhani noted that the incorporation of a Muslim cryptocurrency would be instrumental in propelling an Islamic financial payment system among Muslim countries. He also acknowledged that this approach would deepen trade and economic cooperation by reducing the reliance on the US dollar.

Rouhani’s sentiments were echoed by the Malaysian Prime Minister, Mahathir Mohamad, who asserted: “We are hearing this for the first time — that Iran and Turkey are of the opinion that we should use an alternative to the US dollar.”

He added: “We can use our own currencies or have a common currency.”

The Autonomy of Cryptocurrencies

Rouhani acknowledged that Muslim nations were disadvantaged by economic sanctions as they hindered their prosperity.

Nevertheless, the autonomy presented by cryptocurrencies would be ideal in stamping out the notion that some countries are superior to others.

Rouhani stipulated: “We can also consider joint venture investments to support start-ups in technology.”

He added that Muslim nations had to invest in young Muslims so that they could be trained in sectors, such as nanotechnology.

On the other hand, Turkey’s President Recep Tayyip Erdogan noted that Muslim nations should set their eyes on Islamic financing, whereby a working group could be created to ponder this issue.

Since last month, Iran has been gripped by violent protests sparked by a sharp hike in fuel prices. U.S. sanctions triggered this situation after the American administration withdrew from Iran’s 2015 nuclear deal with world powers in 2018.

Based on reports by rights group Amnesty International, the anti-government protests have been gruesome because at least 304 people have been killed.

Rouhani affirmed: “The Muslim world should be designing measures to save themselves from the domination of the United States dollar and the American financial regime.”

Rouhani believes that the Muslim world will eliminate economic sanctions through measures, such as the introduction of a Muslim cryptocurrency.

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Is Bitcoin a Safe Haven Asset? US-Iranian Tensions Ignite Old Debate

Bitcoin’s price has improved significantly following the U.S. killing of top Iranian general Qassem Soleimani. As tensions escalate between the US and Iran, several crypto analysts have reconsidered the old debate on Bitcoin’s ability to function as a safe-haven asset similar to gold in times of geopolitical uncertainty.

Bradley Keoun from CoinDesk wrote “For some market analysts and investors, bitcoin’s rally served to underscore the digital asset’s perceived value as a hedge against inflation, historically an economic consequence of major wars”.

In the Amun Research Letter—Issue 37 published on Jan 7th, the technology company identified two pieces of proof necessary to confirm Keoun’s argument—proof that Bitcoin could act as a safe haven asset in theory, and proof that the market is actually treating Bitcoin like gold or other safe-haven assets. According to Amun’s research, the second proof is what really decides Bitcoin’s price reaction to geopolitical uncertainty and is the primary driver of Bitcoin’s long-term utilization as a store of value.

Amun’s own Thesis for Crypto discusses Bitcoin as a theoretical safe haven asset due to its limited supply, decentralization, security, and resistance to censorship.

Analyzing Bitcoin’s rolling correlation to Gold over a thirty day period yielded no discernible trend over time and the correlation is incredibly erratic. This data uncovered by Amun defies expectations that there would be a demonstrable strong correlation if Bitcoin did, in fact, fulfill a similar safe haven function.

Amun further outlines a secondary point that the entire market has surged upwards since the US-Iran tension began and the market volatility of Bitcoin is similar to business-as-usual. The researchers conclude that it “undoubtedly true that some investors have purchased Bitcoin, as of late, as a hedge against a global meltdown, this surge in-of-itself does not necessarily prove Bitcoin can now be seen as the de facto safe-haven asset.”

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Iranian General Pushes for Crypto Use to Evade US Sanctions and After Being Blacklisted by the FATF

Saeed Muhammad, a commander of the Islamic Revolutionary Guard Corps’ “Army of Guardians of the Islamic Revolution,” called for Iran to use cryptocurrencies to bypass sanctions imposed on his country by the United States.

The sanctions imposed by the Trump administration and the withdrawal of the US from the Joint Comprehensive Plan of Action in 2018 led to the decrease of the value of Iran’s currency. Sanctions have had an effect on foreign trade and investment in the country; ever since cryptocurrencies have gained popularity in evading sanctions. The economic sanctions imposed by the US have shrunk the Iranian economy by 10 to 20 percent.

Iran added to the FATF blacklist

The intergovernmental organization, the Financial Action Task Force (FATF) recently added Iran to a blacklist of countries that have failed to comply with anti-terrorism financing requirements. Iran was added to the blacklist after more than three years of warnings from the FATF to comply with the requirements. Iran would be looking at tougher external auditing of financing firms and even more scrutiny of transactions with Iran.

Calling for the use of cryptocurrencies

According to Iranian crypto news organization Coinit.ir, Mohammad addressed a crowd on Feb. 26, “We are demanding the creation of a more sophisticated mechanism to bypass sanctions. To circumvent sanctions, we must develop solutions such as the exchange of products and the use of cryptocurrencies with our partnerships [in other countries].”

Iran’s development with crypto and blockchain

With the value of the country’s currency dropping and sanctions imposed, Iranian President Hassan Rouhani’s administration announced the idea of launching a national cryptocurrency in 2018. Since then, Iran’s Ministry of Industries, Mining and Trade have issued more than 1,000 cryptocurrency mining licenses to local operators.

The national government also has been working with blockchain startups to improve its financial infrastructure. The central government has been seen providing funding for one company, some private banks have been backing a few projects as well.

Why Energy Experts are Watching the Crypto Market Closely

The oil market is currently witnessing a tussle between Russia and Saudi Arabia on the issue of oil production to counter the slowdown of the US Market.

If the rumors are to be believed, the Iranian Government is making efforts to use cryptocurrency to bypass the sanctions which resulted from their involvement in the manipulation of the oil market. If one takes a closer look, China, Russia, and Iran have been some of the most active countries taking a keen interest in the cryptocurrency space. They are also some of the top oil-producing countries in the world.

Many cryptocurrencies, particularly Bitcoin operates on ‘Proof-of-Work’ algorithms which require energy for mining.

“Big crypto mining pools are rejecting Iranian miners because of sanctions We don’t give a damn about sanctions. If we get sanctioned we’d just shut down the company and open a new one.” as stated by Mikhael Jerlis, CEO of the Russian EMCD.IO mining pool

The three years of the proxy war between Saudi Arabia and Iran in Yemen has left the oil market in chaos. The catalyst appears to be the attacks executed by Houthi rebels at Red Sea’s Bab al-Mandeb Strait resulting in Saudi Arabia halting its oil supplies. This is why the crypto savy alliance of Russia, China and Iran are keeping a close watch on US sanctions and Saudi Arabia’s oil movement.

How Cryptocurrency Kicks In?

It is interesting to address that Bitcoin or for that matter, any other cryptocurrency can replace the ‘dollar’ in the oil market since Bitcoin is the least correlated asset in the glocal economy as compared to the oil market. Despite the havoc ‘Coronavirus’ is creating on the global GDP (reportedly $2.7 Trillion Loss), Bitcoin doesn’t seem to be shaken off from its steady route, having gained twice the market price of $7,900 as compared to last year’s market price.

“You could argue they [gold and the dollar] are inversely correlated. That could be an indication of how bitcoin will be impacted if it’s deemed to be a store-of-value asset class.” Aboualfa said.

However, he also mentioned that Bitcoin/cryptocurrency is looked upon as ‘sanction play’ and not any store-of-value asset class.

Apart from bypassing sanctions via playing with Bitcoins, another factor that makes the energy experts keep a close watch on the crypto market is their deep pockets in the crypto markets. Bitcoin, like any other asset, is currently without a doubt a ‘hot stock’ which is wanted by everyone. Whether or not it is going to make a big mark in the future, its potential to earn you big money in the current case scenario is very real.

On 7th March 2020, Bitcoin took a big hit as its price crumbled to $7,500 from a soaring $9,100. A total of $26 Billion was completely wiped off from the cryptocurrency market. Such a reaction came soon after the oil market plunged 24%, the worst day since 1991. The US West Texas Intermediate Crude posted their report on Monday with a drop as low as 24.59% settling for $31.13/Barrel. The drop in terms of absolute dollars was $10.15.

Apart from the drop on 7th March, Bitcoin again faced a nose crushing fall on 12th March where the price fell below $3,000 bouncing back to struggling $5,500. The reason for such a fall was again attributed to the poor stock market condition in US and fall in Oil Price, not to forget the COVID-19 outbreak.

Source: CoinMarketCap

Such kind of dips in the crypto markets (triggered by oil market) are huge opportunities for the big corporate giants and energy experts with a vested interest to buy crypto assets at low prices and make a profit out of it once the market is on the rise again.

Jehan Chu, co-founder of Kenetic Capital said,”For those who have long term investment horizons, bitcoin is absolutely a buy during these dips. We can expect more of this volatility sparked by macro health and financial shocks, but ultimately long term investments in the digital future and it’s key asset Bitcoin will be a winning strategy”

In order to maximize profits and take the full advantage (even when oil market is down), energy experts are keeping a close watch on the crypto market as part of their asset portfolio diversification.

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Iran to Pump Liquidity in Economy by Permitting Power Plants to Mine Bitcoin

Iran has given power plants the go-ahead to undertake Bitcoin mining on a large scale as this will spur economic growth from the revenue generated. Nevertheless, interested parties must adhere to various regulations like not using subsidized fuel to extract Bitcoin and other cryptocurrencies.

Approval of tariffs

Through the Ministry of Industry, Mines and Trade, the Iranian government stipulated that 14 power plants had applied for the establishment of cryptocurrency extraction centers with a total capacity of more than 300 megawatts (MW). This power consumption is equivalent to that of three provinces in this nation.

Upon being granted the requisite licenses and not using subsidized electricity, the government would grant the power plants their request.

An Iranian electricity board spokesman noted, “Power plants can operate for virtual currency extraction centers if they comply with the approved tariff.”

However, Mostafa Rajabi Mashhadi, the assistant manager of Iran’s national electricity board, warned, “Now and in a situation where the supply of electricity is of great importance to the public, we will not allow those who misuse the tariffs provided for the agricultural and industrial sectors to produce bitcoins that are worth more than $9,000.”

He added that unlawful Bitcoin miners would face the full force of the law.

Power plants that are not on the national grid have also been given the nod given that export fuel price should be 70%.

Cheap electricity

Rajabi Mashhadi acknowledged that Iran has one of the cheapest electricity tariffs, and this is instrumental in crypto mining as miners seek conducive environments and cheap power to optimize profits.

Bitcoin, the leading cryptocurrency, continues to make airwaves after breaking the $10,000 resistance level that it has been trying to surpass for quite some time. It is currently hovering around the $11,000 price.

According to a new report by Fidelity Digital Assets, the crypto arm of investment firm Fidelity Investments, Bitcoin’s scarcity is deemed crucial in making it an aspirational store of value by many investors.

Authorities Uncover Illegal Bitcoin Mining Farm In Kyrgyzstan

Federal authorities have uncovered a large illegal Bitcoin (BTC) mining site in Kyrgyzstan being operated by government officials of the Free Economic Zone.

The illegal Bitcoin mining site is located on the territory of Bishkek Free Economic Zone and was set up there to take advantage of the cheap electricity in the country. The raid was coordinated by the country’s top anti-corruption watchdog, The State Service for Combating Economic Crimes who posted videos of the raid on YouTube.

The large illegal mining farm is reportedly being operated by government officials and the executives of the Free Economic Zone headed by Duishen Irsaliev.

Further to the discovery, the Kyrgyzstan regulator said it will launch an investigation to determine how the mining equipment was delivered and the grounds upon which electricity and internet were supplied.

Illegal Bitcoin Sites are not Uncommon in Asia

The discovery of an illegal mining site in Kyrgyzstan, a Central Asian country is not uncommon in the region. Recently, Chinese police discovered an illegal Bitcoin mining operation that was buried underneath a local cemetery in the city of Daqing, Heilongjiang province.

The graves were used as a decoy for a large scale Bitcoin mining operation and a raid launched based on reports of electricity shortage in the area allegedly caused by the mining farm.

The prevalence of illegal Bitcoin mining activities in the region once prompted the Iranian government to declare a 20% reward to anyone with information that can help uncover illegal Bitcoin mining farms.

Bitcoin Mining is Somewhat Lucrative

Bitcoin mining companies have been turning good profits over the last few years. Bitmain, the largest Bitcoin mining equipment manufacturer reported over $300 million in revenue for the first 4 months of 2020 despite the COVID-19 pandemic disruption to market supply chains.

Following its filing for IPO back in November 2019, the world’s second-largest Bitcoin mining hardware manufacturer Canaan Inc raised $90 million in the US further showing the surge in demand for Bitcoin mining products.