How much Bitcoin has Iran mined to cope with inflation and international sanctions?

Since 2019, Iran has mined and traded cryptocurrencies as a necessary solution to cope with strict international sanctions and the severe devaluation of its national currency due to hyperinflation. However, experts say it is still nearly impossible to accurately determine how much Bitcoin Iran is holding.

According to the Cambridge Centre for Alternative Finance, Iran accounted for as much as 7.5% of the total Bitcoin hash rate globally in March 2021, but this figure has plummeted to just 0.12% by January 2022.

Andrew Scott Easton, the founder and CEO of the Bitcoin mining fund Masterminded, estimates that Iran has mined approximately 60,000 BTC throughout its history, equivalent to about 6.4 billion USD at current prices. Meanwhile, Kent Halliburton – co-founder and CEO of the mining platform Sazmining – believes this number ranges from 100,000 to 200,000 BTC since 2018, equivalent to 10.7 to 21.4 billion USD. This period is particularly significant, as Iran began officially licensing cryptocurrency mining activities in 2019.

However, according to Mr. Rajat Ahlawat – a researcher at compliance firm Crystal Intelligence – estimating the true scale of this industry is extremely complex, as much of the mining activity in Iran has been pushed into "underground" operations to avoid paying high electricity prices.

Illicit mining is rampant, legal mining is not profitable

One of the easiest traceable parts is legal mining farms. According to the National Resistance Council of Iran, a dissident organization, about 1,000 licenses were issued in 2020 and more than 10,000 licenses were released in 2022 for miners and exchanges. However, former President Hassan Rouhani once admitted that about 85% of mining operations in Iran were unlicensed as of 2021. The state power company Tavanir estimates that there are up to 700,000 illegal mining rigs operating in Iran at the beginning of this year.

According to Mr. Ahlawat, the main reason is that legitimate farms find it difficult to be profitable due to the high tax rates and electricity prices.

"The steel and iron industry – although it consumes a lot of electricity – is still taxed at a lower rate than crypto miners," Ahlawat explains why most activities take place in the shadows.

Bitcoin does not record the location of miners on the blockchain, making it impossible to trace the origin. This allows individuals and the Iranian government to circumvent sanctions.

Therefore, the condition for being granted a mining license is that all Bitcoin mined must be sold directly to the Central Bank of Iran, so the state can use it without being affected by the sanctions. However, this means that individuals and mining groups will lose significant financial benefits from directly holding Bitcoin.

Ahlawat stated that most mining activities in Iran come from individuals or organizations such as schools and churches, which use free or heavily subsidized electricity. Additionally, there are government-related organizations that also take advantage of cheap electricity to mine coin.

The national power grid is overloaded, yet people are still rushing to mine coin

These illegal activities put immense pressure on the national electricity system, leading to widespread power outages. In response, Tavanir once offered rewards for citizens who reported illegal mining farms.

Ahlawat believes that most mining activities are concentrated in large cities. For example, within 6 months of 2022, the police seized over 9,400 illegal cryptocurrency mining devices in Tehran.

On the recent Sunday, the U.S. conducted airstrikes on Iran's Fordow nuclear facility – a facility built deep in the mountains. During the period from before the attack until Tuesday, the global Bitcoin hashrate decreased by 27.9% according to BitInfoCharts, raising speculation that Iran is mining Bitcoin in this area.

Ahlawat noted that the nuclear facility has enough electrical infrastructure to operate a coin mining farm, but there is no specific evidence showing that Fordow is operating in this manner. Blocksbridge Consulting also dismissed this hypothesis, arguing that one should not rely too much on short-term hashrate data due to its significant volatility – in agreement with Mr. Alex Thorn of Galaxy.

However, if there is indeed mining activity at Fordow, it surely belongs to the government or a state-affiliated entity.

Both Easton and Ahlawat believe that the Islamic Revolutionary Guard Corps (IRGC) is one of the major "players" in the field of coin mining in Iran. This is a powerful armed force established after the Islamic Revolution of 1979. Easton believes that the IRGC could be the largest Bitcoin mining unit in Iran, based on information from the Iranian National Resistance Council.

"Once again, we do not have accurate figures," Ahlawat added. "The Iranian government is notorious for hiding activities. If the government is behind the mining, then there is almost no way to trace it."

People still mine to make a living

In summary, no one knows exactly how much Bitcoin Iran has mined, as about 85% of the mining industry is now operating underground – to avoid electricity bills and hold onto cryptocurrency assets.

While it may be easy to judge Iran, it cannot be denied that a large segment of the civilian population is trying to make a living by mining cryptocurrency to combat hyperinflation.

Decrypt discovered a social media account specializing in selling soundproof boxes for home miners, attracting up to 166,000 followers – equivalent to 0.18% of Iran's population.

The people of Iran are so fascinated by cryptocurrency that last year, the government had to issue warnings about the money-making game Hamster Kombat on Telegram. The Deputy Chief of Staff of the Iranian Armed Forces – Admiral Habibollah Sayyari – referred to this as the "soft weapon" of the West aimed at distracting public opinion from domestic political issues.

Despite warnings, people still continuously "tap" to receive token rewards. This game has attracted over 300 million players worldwide. However, many Iranians complain that the rewards are just "dust" – because the value is too low.

Currently, the HMSTR token has decreased by 90% from its peak, causing those who hold the token to hedge against Iran's 38% inflation to be unable to maintain the value of their assets.

Thạch Sanh