In one of the most unexpected U-turns in the generally turbulent history of national governments and their relationship with cryptocurrencies, Iran has recognized cryptocurrency mining as an official industry. While the crypto community across the world will celebrate this move as another important step towards legitimacy, others are trying to figure out where this came from.
What makes the issue even more important is the current ramping up of tension between Iran and not just the US and the UK, but a host of its regional rivals. In the same geopolitical mess of tensions and threats, the decision to bring the entire mining industry under the legal framework is even stranger.
As analysts try to unravel its meaning, Iran remains characteristically low on explanations. Many are immediately focusing on the financial and economic aspects of having a vibrant branch of any industry, including crypto mining. Others are posting to the possibility of crypto mining being used as a way to circumvent the US financial sanctions. Still, there is no way to deny that the development has not made a big splash in the crypto, but also mainstream media.
The move to legalize and recognize crypto mining came from the economic commissions set up by the government. The same commission was also related to the Iran Chamber of Commerce, Industries, Mines and Agriculture, which stated that the government wanted to regulate the activity using its existing legal framework.
However, the basic action of mining coins was approved by the commission and later on, the cabinet meeting will also discuss it. Besides these institutions, the Central Bank of Iran also took part in the process, which is also an interesting twist to the news. As a purely IT activity, mining should concern nothing but the energy department, being that it is a power-hungry process. But, the presence of the country’s central bank shows that the financial aspect of cryptocurrencies and not crypto mining, in particular, is being considered in Iran.
Crypto enthusiasts are likely assessing this as a potential sign that the country will also allow the use of cryptocurrencies and not just its mining. However, this could easily be a big and hopeful stretch being that countries like China both support and allow mining on a huge scale, but also clamp down on many cryptocurrency aspects. The ban on ICOs is a great example for the same country, even though it provides the majority of the world’s bitcoin hashing power.
Expectedly, the presence of the ministry of energy was the crucial factor in the decision to recognize crypto mining. Homayun Haeri, the deputy minister energy for electricity and energy said that the government ministers will get to vote on the measure that will set the rates of electricity price for the mining farms.
All of this still comes after a very turbulent period for Iran’s crypto mining community. The debate about whether or not crypto mining should be allowed has been going for some time. Yet, in June, the authorities seized the rigs of two mining farms and shut them down.
Haeri himself was previously quoted as saying that the government of Iran should not in any way subsidize mining efforts inside of its borders. The stance of the rest of the Iran government was also predominantly negative about the prospects of the wider use of cryptocurrencies. But, the incredibly low price of electricity still made the potential of mining cryptocurrencies in Iran very appealing.
With the legalization – in a sense – of crypto mining, the big question is related to the use of cryptocurrencies as a means of domestic payment possibility. Previously, the central bank was hostile to this possibility, stating an opinion that the cryptocurrencies should be banned. However, the local industry heavyweights were pushing against this option.
There is also little doubt that the cryptocurrency scene in Iran is a vibrant one, especially because of the US sanctions and the crippling effect on the local currency. In many ways, Iran here resembles Venezuela, where the high level of local fiat instability forced ordinary citizens to find other means of storing wealth and using it without fear of drastic loss in value overnight.
The differences, however, are numerous and Teheran is not Karakas. Furthermore, the Venezuelan government developed petro as a way of gaining control over alternative ways of bringing in funds in the country. Iran is not planning on making its national crypto-token but is instead warming up to the idea of using existing cryptocurrencies instead.
A New Economy
The modern world, especially one that is forming with events like the election of Donald Trump and Brexit, seems to be more and more distancing itself from regular patterns. This applies to games and esports as much as it does to geopolitics and the economy.
A decade ago, Iran would be left with little economic options. Now, paradoxically, the technology that was initially nurtured in the West provides Iran with new options when it comes to building a new economy. What is even more strange is the fact that the basic driver of the same option lies in a different superpower – China and its mining facilities.
Now, it is possible to imagine an Iran where the use of bitcoin is legal and accepted by all institutions. The same currency can flow freely across any border and end up in any digital wallet in the world. Producers of steel in Isfahan want to sell their goods in Nigeria? Not a problem. Do they want to do the same in Denmark? It is just as easy if the partner company accepts bitcoin. Of course, this would not work with huge international companies at first – or maybe ever – but it would with smaller businesses.
Why would a company in a neutral country fear the ire of the US government if they are a 10-person outfit? The business scope alone could, in theory, be well-worth any potential problems. Now, will Iran do this? No one can tell and the chances are against it – but the possibility, for the first time, is there.