Iran Government Legalizes Cryptocurrency Mining
EghtesadOnline: After months of speculation over the fate of mining and trading cryptocurrencies in Iran, the government late on Sunday announced that it recognizes mining cryptocurrency as a legal industrial activity.
In a meeting chaired by President Hassan Rouhani, ministers voted in favor of a proposal that legalizes crypto mining, the government’s website dolat.ir reported.
However, crypto miners must receive special permits from the Ministry of Industries, Mining and Trade.
The government’s decision is still not explicit regarding rules governing trade in cryptocurrencies as it disclaims any responsibility for risks emanating from such digital trade, Financial Tribune reported.
“Traders should accept responsibility of using cryptocurrencies and the potential risks would not be covered or compensated by the government and banks,” the website said.
It can be inferred from the announcement that government has implicitly allowed using cryptocurrencies for payment and trade outside of Iran. “Using cryptocurrencies for transactions inside the country is forbidden”.
The Central Bank of Iran had said earlier in the month that activities related to crypto currencies are illegal, and banned the people and organizations from joining payment networks operating on blockchain technology.
As a digital asset, the cryptocurrency is built on blockchain technology. Blockchain is a system in which records or data are distributed in multiple computers at the same time. It is constantly growing, as new sets of data or blocks are added to it.
Cryptocurrencies are not issued, endorsed, or regulated by any central bank. Instead, they are created through a computer-generated process known as mining.
In addition to being a cryptocurrency unrelated to any government, they are peer-to-peer payment systems since it does not exist in a physical form. As such, it offers a convenient way to conduct cross-border transactions with no exchange rate fees. It also allows users to remain anonymous.
In light of the US sanctions that have hit Iran’s overseas banking relations, many businesses are facing difficulties transferring money in and outside the country.
Due to the fact that cryptocurrencies are untraceable, they could be seen as means that allow Iranians to make international payments while bypassing banking restrictions.
The government’s reticence over using digital money for outbound trade while explicitly banning users from domestic trade gives rise to speculations that Tehran may seek to circumvent the tough economic restrictions with the help of blockchain and other financial and monetary technologies, although government and banking officials dismiss the possibility.
“Iran’s commercial and financial transactions are too heavy to be handled by newfound technologies like blockchain,” argued Ali Divandari, the head of Monetary and Banking Research Institute, in January.
As with other industrial activities, the government says mining cryptocurrencies would be a taxable business and can be eligible for tax exemption if crypto miners repatriate their earnings into the country.
The CBI boss confirmed earlier that miners must repatriate their earnings from mining and trading digital currencies to the country.
Underscoring the need to repatriate earnings from cryptocurrency-related activities emanates from the belief held by the government that since mining cryptocurrency consumes a lot of country’s subsidized electricity power, its earnings should be returned to the country, otherwise it would be seen as a case of capital flight.
Energy officials concerns over the widespread activities of miners using cheap electricity made government to set higher tariffs for electricity consumed for mining activities.
Cryptocurrency mining in Iran has become a lucrative business in recent years due to the extremely low-cost electricity. Each kilowatt-hour currently costs 0.5 cent. Electricity is cheaper in the industrial and agricultural sectors.
Although, the government announcement on Sunday does not clarify the pricing procedure for crypto mining, the Economic Commission of the government approved an Energy Ministry proposal last week based on which the same tariffs used for electricity export will be levied on crypto mining.
The head of Iran Electrical Industry Syndicate, Ali Bakhshi, has said that the ministry proposed 7 cents for each kilowatt-hour of electricity used for crypto mining.
However, as Economy Minister Farhad Dejpasand said earlier, there seems to be restrictions with regard to operating mining equipment during peak hours of electricity consumption.