Amid rolling blackouts in Iran, some blame power-intensive cryptocurrency mining
Government won’t publicly connect bitcoin mining to energy problems, but cheap electricity, plus possible IRGC involvement to fund terror groups, makes country hotbed for crypto
TEHRAN — Iran’s capital and outlying provinces faced rolling power blackouts for weeks in October and November, with electricity cuts disrupting people’s lives and businesses. And while several factors are likely involved, some suspect cryptocurrency mining has played a role in the outages.
Iran’s economy has been hobbled for years by international sanctions over its advancing nuclear program. The country’s fuel reserves have plummeted, with the government selling off more to cover budget shortfalls as wars rage in the Middle East and Tehran grapples with mismanagement.
The demand on the grid has not let up, however — even as Iranians stopped using air conditioners as the weather cooled in the fall and before winter months set in when people fire up their gas heaters.
Heavy government subsidies on electricity in Iran — the state invests almost a fifth of its GDP in that sector — have made it home to the world’s cheapest electricity, at just $0.002/kilowatt in August 2024, as reported by the Pakistan-based Express Tribune — making it among the cheapest countries in which to mine bitcoin, a project whose main expense is electricity.
According to crypto site NFT Evening, the cost to mine one bitcoin in Iran was just $1,324 as of November 2024, compared to more than $100,000 in the US, or more than $300,000 in Ireland, for example — both higher than the price of bitcoin today.
In recent months, however, electricity has become more expensive, jumping as much as 83 percent since September for high consumers, according to the Iran Focus website, amid what the UK-based Iran International reports is about a 40% spike in the cost of living generally.
Meanwhile, bitcoin’s value rocketed to all-time highs after the US election was clinched by Donald Trump. It hit the $100,000 mark for the first time last week, just hours after the president-elect said he intends to nominate cryptocurrency advocate Paul Atkins to be the next chair of the Securities and Exchange Commission.
The surge has led some to suspect that organized cryptocurrency mining — sucking away huge amounts of power — has played a part in the outages in Iran.
“Unfortunately, some opportunistic and exploitative individuals use subsidized electricity, public networks and other resources for cryptocurrency mining without authorization,” Mostafa Rajabi, the CEO of Iran’s government-owned power company, said back in August.
Iran’s state energy company did not respond to a request for comment.
Power outages have come and gone in the past in Iran, which struggles with aging equipment at many of its plants. Over the summer, sustained blackouts struck industrial parks near Tehran and other cities. Then in October and November, rolling power cuts across Tehran’s neighborhoods became the norm in daylight hours.
Climate change has been blamed in part, with persisting droughts and less water running through Iranian hydroelectric dams.
Iran’s President Masoud Pezeshkian ordered several power plants to stop burning mazut, a high-polluting heavy fuel common in the former Soviet Union countries. Tehran has used it in the past to make up the difference in electricity generation.
Fuel reserves, both in diesel and natural gas, also remain low even though Iran is an OPEC member and home to one of the world’s second-largest reserves of natural gas, behind only Russia. There’s been no explanation for the decision to keep those reserves low, though critics have suggested Iran likely sold the fuel to cover budget shortfalls.
For his part, Pezeshkian has said that he must “honestly tell the public about the energy situation.”
“We have no choice but to consume energy economically, especially gas, in the current conditions and the cold weather,” he said in mid-November. “I myself use warm clothes at home; others can do the same.”
Still, winter heating isn’t in full swing quite yet in Tehran — raising questions about where the power is going.
In many poor and densely populated neighborhoods across the country, people have access to free, unmetered electricity. Mosques, schools, hospitals, and other sites also receive free power.
And with electricity in general sold at subsidized rates, bitcoin processing centers have boomed. They require immense amounts of electricity to power specialized computers and to keep them cool.
Determining how much power is used up by cryptomining is difficult, particularly as miners now use virtual private networks that mask their location, said Masih Alavi, the CEO of an Iranian-government-licensed mining company called Viraminer.
Also, miners have been renting apartments to hide their rigs inside empty homes. “They distribute their machines across several apartments to avoid being detected,” Alavi said.
In 2021, one estimate suggested Iran processed as much as $1 billion in bitcoin transactions. That value likely has spiked, given the rise of bitcoin. Meanwhile, Iran’s blackouts began in earnest as bitcoin spiked from around $67,000 to over $100,000 in its historic rally.
Rajabi, the state electricity company CEO, said his firm would offer rewards of $725 for people to report unlicensed bitcoin farms.
The farms have caused “an abnormal increase in consumption, disruptions, and problems in power networks,” Rajabi said.
The amount of power used by some 230,000 unlicensed devices is equivalent, he said, to the entire power needs of Iran’s Markazi province — one of the country’s chief manufacturing sites.
Iranian officials and media have not linked bitcoin’s surge and the ongoing blackouts but the public has, with social media users resharing a video showing a massive bitcoin farm earlier this year uncovered in Iran. A voice off-camera asks how it was possible the electrical company did not discover the farm sooner.
The US Treasury and Israel have targeted bitcoin wallets that they’ve alleged are affiliated with operations run by Iran’s paramilitary Revolutionary Guard to finance allied terror groups in Mideast war zones.
That suggests the Guard itself — one of the most powerful forces within Iran — may be involved in the mining.
In contrast, Iranian media reports nearly every day on individual mining operations being raided by police.
Iran may see bitcoin as a hedge against increased pressure from the incoming Trump administration and as regional allies are engulfed in turmoil, said Richard Nephew, an adjunct fellow at the Washington Institute for Near East Policy.
“The question for the economists inside Iran is do we trust this enough to fund the government,” said Nephew, who has long worked on Iran issues and sanction strategies in the US government.
However, he cautioned against thinking of bitcoin as a magic bullet for Iran, particularly as bitcoin wallets can be targeted in sanctions.
“A pattern of behavior screams out to intelligence services,” Nephew said. “It screams out to bank compliance departments.”
Times of Israel staff contributed to this report.
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