Bitcoin mining may have a role in blackouts plague in Iran

TEHRAN

Iran’s capital and outlying provinces have 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 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.

Meanwhile, bitcoin's value has rocketed to all-time highs after the U.S. election was clinched by Donald Trump. It hit the $100,000 mark for the first time last week.

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.

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.

Still, winter heating isn't in full swing quite yet on Tehran — raising questions where the power is going.

With electricity in general sold at subsidized rates, bitcoin processing centers have boomed.

Determining how much power is used up by mining 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 of 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 bitcoin's rise. 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.

The U.S. 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 militant groups in Mideast war zones.

That suggests the Guard itself may be involved in the mining.