A country where Bitcoin seemed poised to flourish is now trying to make the cryptocurrency a scapegoat.
As blackouts and police raids rock Iran’s upstart Bitcoin mining industry, a match between a currency without a permit and a country strangled by inflation that once seemed a perfect fit is now being questioned.
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As Cointelegraph previously reported, Iran joined Pakistan as a cryptocurrency superpower in the Middle East, due in part to cheap and Crypto Profit heavily subsidised electricity prices, as well as a boost in activity following the approval of Bitcoin mining as an „industrial activity“ for power plants in 2020. It is estimated that there are more than 1,000 legal entities currently engaged in mining activities.
However, the short history of cryptocurrency mining in the country has not always been optimistic. Authorities have moved to shut down at least 1,000 illegal farms in recent months, and Bitcoin spot prices have been mispriced at the moment relative to the rest of the world due to high demand as investors flee the rapidly inflating Iranian rial.
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Now, another source of friction has emerged as the country is plunged into frequent power outages in major population centres.
On 16 January, several media outlets reported that Iran suffered power outages across most of the country. However, social media reports have indicated that power supply has been erratic both before and after the 16 January blackout, and several cities have experienced blackouts over the past two weeks.
Authorities have been quick to blame Bitcoin mining for the blackouts and have conducted police raids on illegal mining operations, but some experts think the government is simply looking for excuses to defend a crumbling power grid.
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In an interview with the Associated Press on Thursday, former deputy head of Iran’s Department of Environment Kaveh Madani said Bitcoin was an „easy victim“ and that „decades“ of administrative mismanagement are a more likely root cause.
Furthermore, while retail mining may currently be acting as a scapegoat for the government, it is clear that the authorities are not turning their backs entirely on cryptocurrencies. As recently as last month, Bitcoin was used to facilitate import payments to Venezuela.
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While the relationship may be shaky at the moment, this certainly doesn’t appear to be the end of Bitcoin in Iran.