— This is the script of CNBC's news report for China's CCTV on May 27, 2021, Thursday.
The newly-announced ban from Iran includes both legal and illegal crypto mining activities. It will last four months till September 22. Iranian President Hassan Rouhani says that currently 85% of bitcoin mining in the country is done illegally. Official data show that these illegal operations consume up to 2,000 MW of electricity during peak hours, while legal ones consume about 300 MW.
Iran is one of the top ten countries hosting crypto mining farms. According to blockchain analysis company Elliptic, 4.5% of global bitcoin mining takes place in Iran. Their research found that to generate the energy needed to mine bitcoin at that scale requires approximately 10 million barrels of oil annually, which amounts to about 4% of Iran's oil exports. But Iran can also generate around $1 billion revenue per year from crypto mining that can help ease the adverse economic impact resulting from the U.S.-led sanctions. Inflation in Iran was almost as high as 50% earlier this year, winning cryptocurrencies some support from local residents. Relatively low electricity prices help Iran attract many overseas miners too, especially when the crypto market was red hot.
However, the Iranian capital of Tehran and several other large cities are facing daily power outages due to the excessive power consumption of crypto mining and that has caused public anger. With the peak electricity demand season coming around summer, and the presidential election scheduled for next month, Iranian authorities have to take action to address public concerns.
Energy consumption isn't a new problem for crypto mining, nor is it a challenge only for Iran. A research project of the University of Cambridge, which tracks global bitcoin power consumption, estimates that bitcoin mining consumes 114.97 TWh of electricity annually, which exceeds the total annual electricity usage of many countries such as the Netherlands and Philippines. Another problem is carbon emission from crypto mining. There are more and more public discussions around these issues, and policy risks are on the rise. The comments from Elon Musk on bitcoin's power consumption and carbon emission are the catalyst of the recent market sell-off.
Industry players and policymakers are looking into appropriate responses, including adjusting the consensus mechanism, efforts to reduce power consumption; increase the use of clean energy through economic and political means, etc. We are starting to see directional changes in the industry; although its long-term development is yet to play out.