Iran and Québec embrace Bitcoin mining

Recognized as an official industry, bitcoin mining can be licensed and taxed — creating local jobs investment opportunities for countries with a surplus of cheap electricity. Crypto mining may also have potential as a money-making method for governments facing economic sanctions. This idea is being explored by Iran, who have legalized and licensed the Bitcoin mining industry to help boost tax revenues amidst economic turmoil.

Sidestepping sanctions

Bitcoin mining made headlines in the country after a seven percent spike in power consumption led to the confiscation of thousands of rigs that had been guzzling the subsidized electricity in former factories. Policies in the country mean that electricity only costs about $0.03 per KwH, compared to an average of $0.14 in the U.S. and $0.08 in China.

However, as sanctions tightened around the country over the last few months, policymakers pivoted — and have now approved official mining operations so the government can collect a share of the profits through taxation.

With the Iranian rial losing 70 percent of its value against the dollar, and the exporting of oil becoming increasingly difficult, mining activity represents a welcome revenue stream.

“The cryptocurrency industry should be recognized as an official industry in Iran, to let the country take advantage of its tax and customs revenues,” said the head of the economic commission, Elyas Hazrati, to Mehr News. “By generating cheap electricity, we can provide the required power for digital miners in the country. The income can be used for purchasing foreign exchanges under US sanctions to remove the difficulties we are faced with.”

Mining is not the only cryptocurrency solution that the Iranian government is flirting with. Earlier this year the country discussed the possibility of a central bank digital currency that would offer a way around financial sanctions blocking access to the SWIFT system.

While legalizing mining won’t provide a route around sanctions, it will allow the government to take their share of the profits, and give them more control over the energy sources that feed the thirsty mining equipment. "Using electricity or natural gas to mine cryptocurrencies is forbidden in peak consumption times", asserts the government mandate, which prohibits mining plants from drawing electricity at household, agricultural or industrial grades, and stipulates that miners must buy at specific rates from the grid, or from new independent power plants.

Bolstering the local economy

The other impetus for legalization is the exodus of miners from another American adversary: China. Beijing is reported to have created a multi-agency task force to discuss what to do about China’s bitcoin mining industry. According to research from Coinshares, China accounted for around 60 percent of bitcoin’s hash power in 2018. One option being considered is the banning of the industry.

Although Bitmain — the largest manufacturer of mining equipment — hasn’t officially commented on the political changes, prospectors running bitcoin mines in the country are now likely to be looking elsewhere for cheap electricity, and some are already in discussion with Iran.

“The Chinese have made requests through official channels for cryptocurrency mining in free zones,” said Mohammad Sharqi, managing director of the Iran Blockchain Association to the Iranian press.

Elsewhere, other governments are also seeking to attract bitcoin miners as a way of boosting the economy.

Blessed with a surplus of 100 terawatt-hours of hydropower, the Canadian province of Québec is turning to bitcoin mining companies to turn this excess electricity into jobs, investment, and heating for neighboring buildings.

Public utility company Hydro Québec first launched a campaign in 2017 to attract data centers to the province and was recently ordered by the government to allocate an additional 300 megawatts (MW) to the industry.

To receive this power, mining companies must meet certain criteria — creating a minimum number of jobs, investing in the locality, and making use of the heat generated by the hardware.

Although no exact figures are given on these benefits, they appear to outweigh what is often cited as the downside of bitcoin mining — the use of the huge amounts of electricity that secure the world’s largest, most valuable and most decentralized digital currency — Bitcoin.