Ali Hosseini is a 26-year-old with a normal nine-to-five job in Tehran. He has a bachelor’s degree in information technology and mostly works in social media and public relations. Two months ago, he bought a Bitcoin mining device with his cousin and has been mining since.
Hosseini had no prior knowledge of blockchains and distributed ledger technologies prior to purchasing the device. Hosseini had only heard in passing about cryptocurrencies five years ago, but forgot all about them until last year when they became all the rage globally.
“At the time we bought the mining device, the rate of the US dollar in Iran was still quite high, so we figured we would make about $90 to $100 a month,” explained Hosseini. “The cost of electricity is relatively low in Iran, so the math seemed viable.”
When his cousin, Pedram Ghasemi, was first attracted to cryptocurrencies, he stumbled upon a website that he ultimately found out was tied to a fraudulent cryptocurrency mining scheme. As Iranians increasingly favor cryptocurrencies, so have the scams. In recent months, Iran’s Computer Emergency Response Team Coordination Center (CERTCC) has issued several warnings to the public concerning cryptojacking, pyramid schemes, and Coinhive among others. Fortunately for the cousins, they found a way around the scams and purchased an application-specific integrated circuit (ASIC) mining device, which allows them to mine cryptocurrencies without having to use a computer.
The cousins spent about 100 million rials (at that time about $526) on the device, an Antminer S9. Around that time, the US dollar soared to an all-time high of 190,000 against the Iranian rial. But it soon dropped to around 140,000 rials due to the Central Bank of Iran’s (CBI) intervention, and now stands at around 103,000 rials. Separate from this, cryptocurrencies began to tumble hard globally. In the last month alone, Bitcoin has fallen more than 45 percent, dropping below $3,500 from around $6,500 where it had relatively stabilized for months.
The fluctuating Iranian currency and falling cryptocurrency values have significantly affected Hosseini and Ghasemi’s calculations, but they still have no regrets. “Foreign exchange rates and Bitcoin prices have fallen and our profits have been slashed, but we’re not seeing losses yet,” said Ghasemi. “According to my calculations, the US dollar must drop below 110,000 rials and Bitcoin must be down to $2,000 for us to really lose”—something he feels is highly unlikely.
Yet the cousins have diverging views when it comes to what they plan to do about their mining initiative in the future. Ghasemi deems the cryptocurrency market to be too volatile and complicated, what he referred to as “guiding hands behind the curtains.” Thus, Ghasemi wants to get out.
Hosseini, on the other hand, plans to brave the risks and buy several more mining devices. He feels cryptocurrencies are the future and will inevitably replace fiat money. Hosseini also thinks Bitcoin demand and prices will skyrocket in the coming years as supply dwindles.
Cryptocurrencies’ global attractiveness is due to their decentralized nature and very fast transaction clearance times. For Iranians, however, there are additional incentives. Iran’s national currency has taken a plunge this year due to the expectation of worsening conditions from US sanctions, the final tranche of which were reimposed in early November that focused on banking and money transfers. The sanctions have only brought more financial isolation to ordinary Iranians that have been bereft of normal international payment methods for decades.
A shifting landscape has also drastically changed the behavior of Iranian authorities, which could in turn entice average citizens to turn away from fiat currencies more quickly. US sanctions have already accelerated work on Iranian blockchain-enabled projects, and have changed how authorities are approaching cryptocurrencies and all related fields.
On September 4, Abolhassan Firouzabadi, the head of the High Council of the Cyberspace—a traditionally conservative entity—announced that all major government bodies have accepted cryptocurrency mining as an industry. He also said the idea of establishing licensed cryptocurrency exchanges is under review. Weeks later, on September 16, Firouzabadi announced that imports of cryptocurrency mining hardware will be legalized in the near future.
The scope of government concessions remains to be seen. It will likely come down to the CBI and the regulatory framework that it adopts for cryptocurrencies. The framework was supposed to be published by late September, but returning US sanctions changed everything, leading to a blanket ban on cryptocurrencies in April as a misguided temporary solution. Now until the decision was reverse. Still, the CBI is expected to divulge its regulatory stance on cryptocurrencies before the end of the current Iranian year in March 2019.
President Hassan Rouhani’s government can significantly impact Iran’s technological future, especially its financial prospects, by taking a stance on blockchain technologies and cryptocurrencies. But due to Iranian authorities’ past positions on emerging technologies, especially those that empower average citizens, not everyone is optimistic.
“As a rule of thumb, I’ve come to believe that whenever the government tries to recognize something and give it an official status, things usually end up worse for the people already working in that area,” said Mohsen Rajabi, a blockchain entrepreneur.
Rajabi thinks the government will probably try to levy tax from mining hardware imports and monopolize, or otherwise exert stringent supervision over online exchanges—something that is expected to discourage private sector players. At the moment, cryptocurrency mining hardware imports are not illegal. Companies usually declare their imports as computer hardware to avoid potential problems.
Rajabi had his first interaction with Bitcoin a few years ago when it was worth around $400. He found the concept of cryptocurrencies very promising and bought himself an ASIC device. He added another shortly after, but has since changed roles to more of a facilitator: Rajabi now buys and sets up mining rigs for private customers, some of whom are thinking about starting mining farms. Rajabi is also in the final steps of setting up a blockchain solutions startup and aims to dedicate a portion of the loans he can obtain to cryptocurrency mining.
“I come across some very interesting cases,” Rajabi noted. “I recently set up a rig for a middle-aged customer who was not tech-savvy at all and had simply heard of mining and its potential profits. He wanted to start with ten devices installed at his factory because it can legally use extremely cheap industrial electricity.”
Maziar Motamedi is a Tehran-based journalist focusing on the Iranian economy. Follow him on Twitter: @MotamediMaziar.