TEHRAN (Iran News) Recently, the Hamshahri newspaper published an article stating: “The cryptocurrency market today mirrors the bitter experience of the 2021 stock market in Iran; a year when many people, hoping for quick and massive profits, poured all their assets into the stock market and ultimately suffered heavy losses.”

That experience showed that blind trust in advertisements and unreliable advice only leads to the collapse of one’s capital.

Now, the same scenario is repeating itself in a new form — the cryptocurrency market. Telegram channels and unlicensed exchanges, which have become even more active due to sanctions and the restrictions imposed by the Central Bank, play the same destructive role in fueling greed-driven excitement among the public.

In general, the roots of cryptocurrency production can be summarized in three layers:

A – Intellectual Layer:

The Cypherpunk movement and the belief in the necessity of privacy and freedom away from the gaze and control of governments and central banks.

B – Technological Layer:

Decades of research in cryptography, which led to the development of mechanisms such as Proof of Work.

C – Economic Layer:

The 2008 financial crisis and the resulting distrust in the centralized banking system, which provided a fertile ground for accepting the idea of an alternative monetary system.

Satoshi Nakamoto, with a completely hidden identity, combined the three layers mentioned above and, in the form of Bitcoin, laid the foundation not only for a digital currency but also for a technological revolution in the structure of global trust.

The identity of Satoshi Nakamoto remains one of the greatest mysteries of the tech world in recent decades. He is the creator of Bitcoin and the author of its original white paper (concept document) in 2008.

On January 3, 2009, Satoshi Nakamoto mined the first block of the Bitcoin blockchain, known as the Genesis Block. This date can be regarded as the starting point of the launch of the first cryptocurrency.

However, research indicates that the idea of “Bit Gold” had been proposed before Bitcoin.

Some speculate that Satoshi might have been part of a secret project of the U.S. National Security Agency (NSA) or the CIA. Although this theory is considered weak due to its contradiction with the interests of the U.S. Federal Reserve, some point out that the cryptographic algorithm SHA-256, used in the creation and distribution of Bitcoin, was designed by the NSA.

The enthusiasm of profiteers worldwide, and quite possibly intelligence agencies, led to the creation and release of other cryptocurrencies alongside Bitcoin to generate competition.

Given these points, entering such a hidden, unknown, and suspicious structure — whose very foundation is conceptually dubious — is purely risky. The rational recommendation is to refrain from entering it.

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Currently, there are 118 authorized cryptocurrency mining units in the country, which must cut off their electricity supply from the national grid from the beginning of next month, Rajabi Mashhadi reiterated.

Last week, the country’s electricity consumption recorded a record of 62,500 megawatts (MW) during peak consumption, which is a significant figure, he said, adding that according to forecasts, the consumption requirement this [Iranian calendar] week (ends on Friday) will exceed 63,000 MW, which means a limited supply of electricity.

Following the Iranian government’s approval of cryptocurrency mining as industrial activity in 2019, numerous companies started mining cryptocurrency across the country thanks to the extremely low-cost electricity, and now Iranian power plants started to see this industry as an opportunity to increase their revenues.

In January 2020, the Ministry of Industry, Mining and Trade issued over 1,000 licenses for cryptocurrency mining units.

In addition to the approved units, some unauthorized miners have also started using household electricity for cryptocurrency mining and this has created major issues for the country’s electricity industry which is already facing serious problems created by drought and reduced rainfall.

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The meeting was also attended by the members of other ICCIMA committees including the development of non-oil exports, energy, knowledge-based businesses, as well as money and capital markets, ICCIMA portal reported.

The attendees of the meeting stressed the need for passing definitive laws and regulations in this field as the first and most important factor to create the necessary basis for the development of this sector.

Speaking in the meeting, Ali Shams Ardakani, the head of ICCIMA Energy Committee presented a report on the cryptocurrency markets around the world and said: “First, the private sector needs to have a comprehensive understanding of the cryptocurrency market and after identifying the functions of such currencies necessary meetings should be held with officials and policymakers for presenting the demands in this field.”

“The private sector should be aware that policymakers may make wrong decisions due to lack of knowledge in this area, and we should try to collaborate to make the context of this industry known to them,” he added.

Further in the event, Farzin Fardis, a member of the ICCIMA committee of knowledge-based businesses, mentioned some of the challenges and issues that the people active in this area are currently facing and said: “The biggest concern of people and businesses in the field of cryptocurrencies is uncertainty with legal issues, sharp fluctuations in value, lack of security and fraud, lack of transparent support and religious considerations.”

The technical-legal structure of the cryptocurrency market should be reformed under the supervision of the Central Bank of Iran (CBI), he stressed.

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Security incidents have been reported in the UK, Germany, and Switzerland, while a similar intrusion is rumored to have also happened at a high-performance computing center located in Spain.

The first report of an attack came to light on Monday from the University of Edinburgh, which runs the ARCHER supercomputer. The organization reported “security exploitation on the ARCHER login nodes,” shut down the ARCHER system to investigate, and reset SSH passwords to prevent further intrusions, ZDnet reported.

The bwHPC, the organization that coordinates research projects across supercomputers in the state of Baden-Württemberg, Germany, also announced on Monday that five of its high-performance computing clusters had to be shut down due to similar “security incidents.” This included:

• The Hawk supercomputer at the High-Performance Computing Center Stuttgart (HLRS) at the University of Stuttgart
• The bwUniCluster 2.0 and ForHLR II clusters at the Karlsruhe Institute of Technology (KIT)
• The bwForCluster JUSTUS chemistry and quantum science supercomputer at the Ulm University
• The bwForCluster BinAC bioinformatics supercomputer at the Tübingen University

Reports continued on Wednesday when security researcher Felix von Leitner claimed in a blog post that a supercomputer housed in Barcelona, Spain, was also impacted by a security issue and had been shut down as a result.

More incidents surfaced the next day, on Thursday. The first one came from the Leibniz Computing Center (LRZ), an institute under the Bavarian Academy of Sciences, which said it was disconnected a computing cluster from the internet following a security breach.

The LRZ announcement was followed later in the day by another from the Julich Research Center in the town of Julich, Germany. Officials said they had to shut down the JURECA, JUDAC, and JUWELS supercomputers following an “IT security incident.”

New breaches also came to light today, on Saturday. German scientist Robert Helling published an analysis on the malware that infected a high-performance computing cluster at the Faculty of Physics at the Ludwig-Maximilians University in Munich, Germany.

The Swiss Center of Scientific Computations (CSCS) in Zurich, Switzerland also shut down external access to its supercomputer infrastructure following a “cyber-incident” and “until having restored a safe environment.”

ATTACKERS GAINED ACCESS VIA COMPROMISE SSH LOGINS

None of the organizations above published any details about the intrusions. However, earlier today, the Computer Security Incident Response Team (CSIRT) for the European Grid Infrastructure (EGI), a pan-European organization that coordinates research on supercomputers across Europe, has released malware samples and network compromise indicators from some of these incidents.

The malware samples were reviewed earlier today by Cado Security, a US-based cyber-security firm. The company said the attackers appear to have gained access to the supercomputer clusters via compromised SSH credentials.

The credentials appear to have been stolen from university members given access to the supercomputers to run computing jobs. The hijacked SSH logins belonged to universities in Canada, China, and Poland.

Chris Doman, Co-Founder of Cado Security, told ZDNet today that while there is no official evidence to confirm that all the intrusions have been carried out by the same group, evidence like similar malware file names and network indicators suggests this might be the same threat actor.

According to Doman’s analysis, once attackers gained access to a supercomputing node, they appear to have used an exploit for the CVE-2019-15666 vulnerability to gain root access and then deployed an application that mined the Monero (XMR) cryptocurrency.

Making matters worse, many of the organizations that had supercomputers go down this week had announced in previous weeks that they were prioritizing research on the COVID-19 outbreak, which has now most likely been hampered as a result of the intrusion and subsequent downtime.

NOT THE FIRST INCIDENT OF ITS KIND

These incidents aren’t the first time that crypto-mining malware has been installed on a supercomputer. However, this marks the first time when hackers did this. In previous incidents, it was usually an employee who installed the cryptocurrency miner, for their own personal gain.

For example, in February 2018, Russian authorities arrested engineers from the Russian Nuclear Center for using the agency’s supercomputer to mine cryptocurrency.

A month later, Australian officials began an investigation into a similar case at the Bureau of Meteorology, where employees used the agency’s supercomputer to mine cryptocurrency.

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The charter issued by Iran’s Ministry of Industry, Mine and Trade will allow iMiner to operate with a computing power of 96,000 terahash per second at a bitcoin mining farm in the central city of Semnan, the report said.

Hashrate is a measure of the power of computers hooked up to the bitcoin network that dictates their ability to produce new coins.

According to MSN, the bitcoin mining farm set up by iMiner with 311 billion rials ($7.3 million) of investment is the biggest in Iran, where 6,000 machines will be producing cryptocurrencies.

The official website of iMiner introduces it as “one of the first and most reputable” companies offering custody and other back-office services in Turkey, Russia, Canada, and the United States.

Interest in bitcoin mining is finding traction in Iran where subsidized power rates are attracting prospectors from countries as far as China, Ukraine, and France.

The government, however, has proceeded with caution due to the opaque nature of cryptocurrencies and the electricity-intensive process strain on Iran’s national power grid.

Bitcoin mining consumes large quantities of energy because it uses costly software to solve complex math puzzles to validate transactions in the cryptocurrency. The first miner to solve the problem is rewarded in bitcoin and the transaction is added to the blockchain or digital ledger.

Last year, Iran’s energy ministry published a report on power consumption, which put the central Semnan province in the red for the highest utilization rate. The small province reportedly dwarfed the vast southern province of Khuzestan which was grappling with scorching temperatures.

Countries with cheap electricity have emerged as major hosts of cryptocurrency mining. China is a major player in the bitcoin market, hosting a substantial share of miners.

In the past, Chinese cryptocurrency miners have officially requested to set up shop in Iran, taking advantage of cheap energy to power and cool their electricity-intensive servers.

Iran faces a Chinese request for bitcoin mining

Chinese cryptocurrency miners have officially requested to set up shop in Iran, taking advantage of the country

Digital miners in Iran are said to be basing their operations in locations with access to subsidized electricity, such as factories, agricultural sites, government offices, and mosques.

While there is no precise tabulation on cryptocurrency mining in Iran, one electrical industry spokesman has put the number of bitcoin mining machines north of 148,000.

On the flip side, the government is facing a serious dilemma as it is taking to the virtual, decentralized currency concept.

Despite being an alternative currency alternative, governments across the world are wary of bitcoin’s disruptive nature due to a lack of state control and regulation.

In the United States, lawmakers have called for a bill outlawing cryptocurrencies, because they can help governments skirt sanctions.

That is because an awful lot of US power comes from the dollar being used as the standard unit of international finance and transactions. The use of bitcoin is eating at that advantage and effectively disempowering the United States.

For countries like Iran, however, virtual and digital currencies provide a back-channel to bypass US sanctions.

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Still, Iran’s stringent regulations on digital mining have forced many operators to move to more crypto-friendly countries, Amir-Hossein Saeedi Naeeni, a member of the Information and Communications Technology (ICT) Guild Organization’s blockchain commission, said.

Digital mining, due to its rapid global expansion, generated quite a lot of interest among Iran’s IT operators who bought and deployed bitcoin extraction gear in the past two years.

But the enthusiasm was sapped by the government’s introduction of regulatory measures, Saeedi claimed.

“The laws announced by government institutions for crypto mining are very strict in comparison to other industries in the country, causing many miners to stop operating or migrate to the regional countries for investment,” he said.

Saeedi said license tariffs and electricity costs are such that make crypto mining less profitable in Iran, adding they have to be revised and made more transparent along with the regulatory measures.

He touched on the “special” situation of the country which is under the most restrictive American sanctions ever.

“The digital mining industry, besides bringing currency into the country, can facilitate trade where traders can use cryptocurrencies to import goods and bypass payment problems resulting from the banking sanctions,” he added.

Last August, the Iranian government enacted legislation that officially recognized cryptocurrency mining as an industry. The law requires miners to pay an export premium on electricity and prohibits them from mining during peak electricity-usage hours.

Other than that, cryptocurrency trading remains illegal in Iran, meaning the newly-minted coins need to be exported and yields repatriated, making them subject to taxation.

The decision to regulate digital mining came in response to illegal miners who took advantage of the country’s cheap and subsidized energy to set up farms across Iran.

Last summer, officials blamed a surge in activities related to mining of digital currencies like bitcoin for up to seven percent increase in the country’s monthly electricity consumption.

Ministry of energy officials said at the time that the country’s power grid had become unstable as a result of increased mining of cryptocurrencies.

Nevertheless, media reports said last year that Iranian government officials were considering developing a domestic digital currency to counter US sanctions.

Alireza Daliri of the Directorate for Scientific and Technological Affairs of the Presidential Office said a number of domestic knowledge-based companies were working over the project in cooperation with the Central Bank of Iran (CBI).

The head of the company contracted by the CBI to design and develop a national digital currency said then a blockchain and cryptocurrency research lab had been set up in Iran.

Blockchain is a digital ledger or database where transactions in Bitcoin and other cryptocurrencies are recorded.

According to Iranian media reports, a state-backed national cryptocurrency backed by the local fiat unit, the rial, has already been developed but it has yet to be approved for use by the central bank.

Iran’s currency was targeted by the first round of US sanctions imposed in May 2018 after President Donald Trump withdrew from a landmark 2015 nuclear deal.

Under US pressures, the global banking network SWIFT has dropped Iran from its platform, making international financial settlements with the country almost impossible.

Blockchain and other digital ledgers holding cryptocurrency records process transactions without being controlled by any person or entity.

The US government has reportedly warned digital marketplaces that buy and sell bitcoin and companies that sell computers used to process bitcoin transactions to avoid providing services to Iranians.

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“Energy ministry is to announce the instruction on supplying electricity for mining units besides the set electricity tariffs for the activity,” he added.

“The Central Bank of Iran (CBI) has announced trading cryptocurrencies illegal in the country because it regards digital money as a kind of exports good,” he said.

“The earned revenues from exporting domestically-mined cryptocurrencies must be re-injected back to Iran’s financial system through NIMA- Iran’s Forex Management Integrated System,” he underlined.

On July 29, the Iranian government authorized crypto mining as an industrial activity.

The Iranian government endorsed crypto mining as an industrial activity and noted that those involved should take required licenses from the Ministry of Industry, Mine and Trade.

According to the decision, those who use cryptocurrencies should accept its risks and the government and banking system will not provide any guarantees for them. It also notes that using digital money in domestic transactions is not allowed.

Crypto mining, like other industrial activities, is taxable unless individuals export cryptocurrencies and bring back the revenues to the country, highlights the decision.

This is deemed the first step to legalize cryptocurrencies in Iran. Many experts believe that cryptocurrencies can be used as a means to mitigate the effects of US-imposed harsh economic sanctions against Iran.

Low-price electricity has encouraged many to mine cryptocurrencies in the country; even some reports indicate that miners from other countries such as China are establishing farms in Iran. The government is yet to approve the final price rate for miners.

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According to the decision, those who use cryptocurrencies should accept its risks and the government and banking system will not provide any guarantees for them. It also notes that using digital money in domestic transactions is not allowed.

Crypto mining, like other industrial activities, is taxable unless individuals export cryptocurrencies and bring back the revenues to the country, highlights the decision.

This is deemed the first step to legalize cryptocurrencies in Iran. Many experts believe that cryptocurrencies can be used as a means to mitigate the effects of US-imposed harsh economic sanctions against Iran.

Low-price electricity has encouraged many to mine cryptocurrencies in the country; even some reports indicate that miners from other countries such as China are establishing farms in Iran. The government is yet to approve the final price rate for miners. According to reports, the government is likely to set the exported rate for mining farms which would be around 7 cents per kilowatt-hour; currently the rate is around 2 cents.

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According to the request of some organizations, IRICA has notified the tariff rate of ‘miner’ devices used for cryptocurrencies.

If the government okays with importing devices for producing cryptocurrencies, IRICA will execute legal directives, he stated.

According to him, even goods which are banned from being imported into the country have tariff line, he said, adding, “for example, some psychotropic or psychedelic drugs have tariff line in IRICA.”

However, Ministry of Industry, Mine and Trade and Central Bank of Iran (CBI) should issue approval letter for importing cryptocurrency devices into the country, he emphasized.

With the coordination made in this regard, devices for extraction of cryptocurrencies have classified in Tariff Line No. 84719090, so that this tariff line is related to the ‘computers and central processors’, IRICA deputy added.

In cryptocurrency a miner is a computer or group of computers ‘searching’ for cryptocurrency. They constantly verify transactions and as an incentive they get rewarded with cryptocurrency.

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Referring to the fact that there are no specific crypto regulations in Iran, he said that domestic mining units are working presently under the permit they received form Ministry of Information and Communications Technology of Iran.

Accordingly, he urged the lawmakers to accelerate ratification of required new laws in this sector.

“The price for electricity used by miners is to increase up to 7 cents in Iran,” he said, “and it is the same tariff levied on commercial units, which is the highest tariff level.”

On Sunday, Iran’s Minister of Information and Communications Technology Mohammad Javad Azari Jahromi urged the regularization of bitcoin mining business in Iran given the recent reports of bitcoin miners’ use of Iran’s cheap power.

The minister called for regularizing the operators which are active in crypto-currency mining and added the government should issue legal certification for them.

“Most of crypto-currency mining operations in the world used to be carried out in China but today, Iran is turning into a new hub in this area,” the minister said.

He went on to say that electricity prices in Iran are too cheap in comparison with other parts of the world, adding in some European states, the price of each kilowatt of industrial power stands at 20 cents while in Iran the figure is about 9 to 10 cents.

“This is mainly due to the gas reserves that Iran enjoys. These reserves are used freely by Iranian power plants,” he said. “This has turned Iran into an interesting country for crypto-currency miners in the world.”

He said mining machines have already been smuggled into the country and there are many active sites in this area. “I’ve heard of Chinese miners’ presence in Iran through unconfirmed reports,” he said.

“Estimates by Iran’s Energy Ministry show that 700 megawatts of the country’s power are used for mining. This violates ordinary people’s rights,” he said.

On Saturday, an Iranian lawmaker called on the government to prepare and submit a bill on cryptocurrencies while reports indicate a surge in the country’s power consumption due to bitcoin mining.

“Unfortunately, there is no specific law to monitor activities around cryptocurrencies in the country and it is essential that the government prepares a specific bill for determining the fate of cryptocurrencies’ mining, such as bitcoin, and exchanging currencies using this digital money and submit the bill to the Parliament so that the power rate of those who are mining across the country would be determined,” MP Ali Akbar Karimi, a member of Iranian Parliament’s Economic Committee, told Mehr News Agency.

“Mining cryptocurrencies has become a common and widespread activity in Iran and it consumes considerable power which has caused problems for the country, especially in the hot season.”

A mechanism should be defined to control power consumption and also to punish those who mine using subsidized power rates, he added.

The Central Bank of Iran has just announced a ban on activities around cryptocurrencies while such measure has not still turned into a law, he highlighted, adding, “using digital currencies is a good solution for ditching sanctions but it needs to be regulated.”

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