Iranian Bitcoiners Risk Fines, Jail Time as Government Regulates Mining

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The Iranian government has been cracking down on cryptocurrency mining operations over the past three months, pending new legislation for formal mining licenses.

Since authorities have not officially approved a mining license process, several sources told CoinDesk that bitcoin miners are now operating in a climate of perpetual fear.

In rare cases, they can be jailed for continuing to operate. More often, they face exorbitant fines or have their equipment sealed off.

“If the government learns about my equipment, they’ll seal it and turn it off,” one small-scale bitcoin miner, operating just 15 machines in Tehran, told CoinDesk, adding:

“I’d be arrested. … After six months of waiting [for licensing regulations], they still want to make miners seem like criminals.”

Another professional bitcoin miner estimated the government has confiscated 80,000 mining devices over the past four months. It’s hard to say what the real numbers are, since they are not publicized. But this second bitcoiner alone lost access to thousands of machines, as he was operating an industrial farm connected directly to a power plant. He said 30 households lost their income when the government shut down his operation.

Plus, he says he personally knows more than 15 bitcoiners who were jailed.

“We have to wait for the Ministry of Energy, and the [new] regulations, to make a protocol with tariffs for our business,” he said.

An anonymous bitcoin developer in Tehran, who often works with miners, told CoinDesk many bitcoiners surrender the deeds to their homes to get out of jail, because the fines themselves can be worth more than their annual salaries. He said the fines range from $2,000-5,000 per machine, which is several times their retail value.

“There are also fines on the price for electricity,” he added, explaining that the electricity fines are often four times the annual cost of power for the machines. For example, if the mining farm paid $5,000 for a whole year of electricity, the fine for using a subsidized electricity source could be $20,000.

In Iran, the state-controlled electricity prices vary according to use-cases and the category for bitcoin mining has yet to be formally established.

As for the second miner who lost access to his industrial-sized operation, he told CoinDesk his company has an “open case” in court over a fine. He expected to be charged twice the market value for thousands of machines. But he’s unsure how he will be able to pay.

Smuggled equipment

These bitcoin miners face compliance hurdles from multiple agencies, related to both smuggled equipment and subsidized electricity fees.

The anonymous developer said most computer equipment and luxury goods are technically smuggled, from air conditioners to televisions sets. He said foreign grey market products are usually cheaper and higher quality than those sold through official retailers.

“If [the government] really wanted to fine all the people in the country using or selling smuggled merchandise, they’d have to fine everyone in this country,” he said, adding:

“Yet in just one area in the southern part of Tehran, a dozen [mining] farms were [recently] closed.”

As reported by a Tehran-based journalist for Bitcoin Magazine, the acute focus on fining bitcoin miners is wreaking havoc on the Iranian crypto community.

A survey of 600 Iranian bitcoiners, conducted over the past two weeks by the market research firm Gate Trade, found that 40 percent of respondents said the lack of regulatory clarity was their “biggest challenge related to bitcoin.”

Another miner operating near Tehran, also tapping into an industrial power plant, said up to at least 30 people associated with his farm haven’t had income for over a month. Plus, he said people with smaller, personal miners are afraid to move their equipment these days.

“If you were caught by the police having mining equipment in your car, your equipment would be seized and you would be charged with a penalty for handling or moving illegally imported machines,” the third miner said.

Indeed, local news outlet Fars News reported in July that several unnamed individuals were arrested in the southwestern city of Saveh for transporting smuggled mining equipment.

Power battles

Given this context, the growth of Iran’s bitcoin mining sector is screeching to a halt, with some bitcoiners taking small operations deeper into the proverbial underground and others halting completely.

Just like the second miner, the third mining farm operator’s machines are now sealed under government control, as he too has a pending court case.

Both this third miner and the developer said there is no evidence to suggest the government is mining bitcoin with confiscated equipment, and they hope it will remain that way.

To be fair, the third miner also said many people steal electricity for bitcoin mining, though he said his operation had a contract with a power plant. He personally doesn’t know anyone who went to jail over the summer. Most of his associates either lost access to their equipment or had to stop working.

“All we want, as people living in Iran, is for our government to understand the importance of this opportunity,” the third miner said, speaking to the hope that Iran will become a hub for bitcoin mining operations.

The second miner agreed. Imagining a worst-case scenario, he added: