Iran’s Power Outages: Cryptocurrency Mining Suspected as Contributing Factor

Rolling power blackouts have plagued Iran’s capital and provinces in recent weeks, disrupting daily life and businesses. While multiple factors likely contribute to the outages, some speculate that cryptocurrency mining plays a significant role, The Associated Press reports.

Iran’s economy has faced international sanctions for its nuclear program, leading to depleted fuel reserves. The government has sold off fuel to cover budget deficits amidst ongoing regional conflicts and mismanagement. Despite the situation, demand on the electrical grid remains high, despite decreased air conditioner use in cooler weather.

Bitcoin’s recent surge in value has coincided with the outages. After President-elect Donald Trump’s election and his stated intention to appoint cryptocurrency advocate Paul Atkins as SEC chair, bitcoin hit $100,000 for the first time. This has led to speculation that organized cryptocurrency mining, which consumes vast amounts of power, may be contributing to the power shortages.

Iran’s state energy company has not commented on the matter. Iran has a history of power outages due to aging equipment, particularly during the summer months. In October and November, however, rolling blackouts became the norm in Tehran during daylight hours.

Climate change, droughts, and reduced hydroelectric dam capacity have been cited as contributing factors. Additionally, President Masoud Pezeshkian has ordered the closure of power plants using mazut, a polluting fuel common in former Soviet countries. Iran has used mazut in the past to supplement electricity generation.

Despite being an OPEC member and holding the world’s second-largest natural gas reserves after Russia, Iran’s fuel reserves remain low. Critics have suggested the government sold fuel to cover budget shortfalls, but no official explanation has been provided. Pezeshkian has stated the need for transparency regarding the energy situation.

With winter heating not yet in full swing, questions arise about where the electricity is being consumed. Many low-income and densely populated neighborhoods enjoy free, unmetered electricity, and subsidized rates are provided to various entities. Consequently, bitcoin mining centers have flourished, using specialized computers that require significant power and cooling.

Quantifying the exact power consumption of cryptocurrency mining is challenging due to miners using virtual private networks (VPNs) to mask their locations. Moreover, miners have resorted to renting apartments to conceal their operations within empty homes. Estimates suggest that Iran processed up to $1 billion in bitcoin transactions in 2021, a figure likely to have increased with bitcoin’s rally. The blackouts began as bitcoin’s value surged from $67,000 to over $100,000.

The CEO of the state electricity company, Rajabi, announced rewards for reporting unlicensed bitcoin farms, which he claims have caused “an abnormal increase in consumption, disruptions, and problems in power networks.” He estimated that the power consumed by approximately 230,000 unlicensed mining devices is equivalent to the entire power needs of Markazi province, a major industrial hub.

While Iranian officials and media have not explicitly linked bitcoin’s surge to the blackouts, the public has. Videos of massive bitcoin farms uncovered by authorities have been widely shared on social media, raising questions about the electricity company’s oversight.

The US Treasury and Israel have targeted bitcoin wallets allegedly affiliated with Iran’s Revolutionary Guard, which finances militant groups in the Middle East. This suggests the Guard’s involvement in cryptocurrency mining. In contrast, Iranian media frequently reports on police raids targeting individual mining operations.

Some analysts believe Iran may view bitcoin as a hedge against increased pressure from the incoming Trump administration and regional turmoil.