Iran’s capital and major cities plunged into darkness in recent weeks as rolling outages left millions without electricity for hours. Traffic lights died. Offices went dark. Online classes stopped.
With toxic smog blanketing Tehran skies and the country buckling under the pandemic and other mounting crises, social media has been rife with speculation. Soon, fingers pointed at an unlikely culprit: Bitcoin.
Within days, as frustration spread among residents, the government launched a wide-ranging crackdown on Bitcoin processing centers, which require immense amounts of electricity to power their specialized computers and to keep them cool — a burden on Iran’s power grid.
Authorities shuttered 1,600 centers across the country, including, for the first time, those legally authorized to operate. As the latest in a series of conflicting government moves, the clampdown stirred confusion in the crypto industry — and suspicion that Bitcoin had become a useful scapegoat for the nation’s deeper-rooted problems.
Since former President Donald Trump unilaterally withdrew in 2018 from Tehran’s nuclear accord with world powers and re-imposed sanctions on Iran, cryptocurrency has surged in popularity in the Islamic Republic.
For Iran, anonymous online transactions made in cryptocurrencies allow individuals and companies to bypass banking sanctions that have crippled the economy. Bitcoin offers an alternative to cash printed by sovereign governments and central banks — and in the case of Iran and other countries under sanctions like Venezuela, a more stable place to park money than the local currency.
“Iranians understand the value of such a borderless network much more than others because we can’t access any kind of global payment networks,” said Ziya Sadr, a Tehran-based Bitcoin expert. “Bitcoin shines here.”
Iran’s generously subsidized electricity has put the country on the crypto-mining map, given the operation’s enormous electricity consumption. Electricity goes for around 4 cents per kilowatt-hour in Iran, compared to an average of 13 cents in the United States.
Iran is among the top 10 countries with the most Bitcoin mining capacity in the world — 450 megawatts a day. The U.S. network has a daily capacity of more than 1,100 megawatts.
On Tehran’s outskirts and across Iran’s south and northwest, windowless warehouses hum with heavy industrial machinery and rows of computers that crunch highly complex algorithms to verify transactions. The transactions, called blocks, are then added to a public record, known as the blockchain.
“Miners” adding a new block to the blockchain collect fees in bitcoins, a key advantage amid the country’s currency collapse. Iran’s rial, which had been trading at 32,000 to the dollar at the time of the 2015 nuclear deal, has tumbled to around 240,000 to the dollar these days.
Iran’s government has sent mixed messages about Bitcoin. On one hand, it wants to capitalize on the soaring popularity of digital currency and sees value in legitimizing transactions that fly under Washington’s radar. It authorized 24 Bitcoin processing centers that consume an estimated 300 megawatts of energy a day, attracted tech-savvy Chinese entrepreneurs to tax-free zones in the country’s south and permitted imports of computers for mining.
Amir Nazemi, deputy minister of telecommunications and information, declared last week that cryptocurrency “can be helpful” as Iran struggles to cope with sanctions on its oil sector.
On the other hand, the government worries about limiting how much money is sent abroad and controlling money laundering, drug sales and internet criminal groups.
Iranian cryptocurrency miners have been known to use ransomware in sophisticated cyber attacks, such as in 2018 when two Iranian men were indicted in connection with a vast cyber assault on the city of Atlanta. On Thursday, British cybersecurity firm Sophos reported it found evidence tying crypto-miners in Iran’s southern city of Shiraz to malware that was secretly seizing control of thousands of Microsoft servers.
Iran is now going after unauthorized Bitcoin farms with frequent police raids. Those who gain authorization to process cryptocurrency are subject to electricity tariffs, which miners complain discourage investment.
“Activities in the field are not feasible because of electricity tariffs,” said Mohammad Reza Sharafi, head of the country’s Cryptocurrency Farms Association. Despite the government giving permits to 1,000 investors, only a couple dozen server farms are active, he added, because tariffs mean Bitcoin farms pay five times as much for electricity as steel mills and other industries that consume far more power.
Now, miners say, the government’s decision to close down major Bitcoin farms operating legally seems designed to deflect concerns about the country’s repeated blackouts.
As Tehran went dark last week, a video showing industrial computers whirring away at a massive Chinese cryptocurrency farm spread online like wildfire, prompting outrage about Bitcoin’s outsized thirst for electricity. Within days, the government closed that plant despite its authorization to operate.
“The priority is with households, commercial, hospitals and sensitive places,” said Mostfa Rajabi Mashhadi, spokesman of Iran’s electricity supply department, noting that illegal farms sucked up daily some 260 megawatts of electricity.
Although Bitcoin mining strains the power grid, experts say it’s not the real reason behind Iran’s electricity outages and dangerous air pollution. The telecommunications ministry estimates that Bitcoin consumes less than 2% of Iran’s total energy production.
“Bitcoin was an easy victim here,” said Kaveh Madani, a former deputy head of Iran’s Department of Environment, adding that “decades of mismanagement” have left a growing gap between Iran’s energy supply and demand.
Bitcoin “mining’s energy footprint is not insignificant but these problems are not created overnight,” he said. “They simply need one trigger to spiral out of control.”
A sharp drop in supply or spike in demand, like this winter when more people are staying home because of the coronavirus pandemic, can upset the balance of a grid that draws mostly from natural gas. Authorities reported that households have increased their heating gas usage by 8% this year, which Tehran’s electric supply company said led to “limitations in feeding the country’s power plants and a lack of electricity.”
Sanctions targeting Iran’s aging oil and gas industry have compounded the challenges, leaving Iran unable to sell its products abroad, including its low-quality, high-sulfur fuel oil known as mazut. If the hazardous oil isn’t sold or shipped it must be swiftly burned — and it is, in 20% of the country’s power plants, according to environmental official Mohammad Mehdi Mirzai. The smoldering fuel blackens the skies, particularly when the weather cools and wind carries emissions from nearby refineries and industrial sites into Tehran.
During the power blackouts, thick layers of pollution coated mountain peaks and hovered over cities, with readings of dangerous fine particulate pollution spiking to over 200 micrograms per cubic meter, a level considered “dangerously” unhealthy.
As the government publicized its clampdown on Bitcoin farms, miners balked at all the blame over their energy guzzling. Many warned that despite its potential to become a cryptocurrency utopia, Iran would continue to fall behind.
“These moves harm the country,” said Omid Alavi, a cryptocurrency consultant. “Many neighboring nations are attracting foreign investors.”
TEHRAN, Iran (AP) — By NASSER KARIMI and ISABEL DEBRE
Online review platform Trustpilot chooses London for IPO
Online review platform Trustpilot said Monday it plans to sell shares in London, in a stock offering that helps shore up the city’s status as a financial hub and destination for tech companies after Brexit.
Trustpilot, which is based in Copenhagen, Denmark, said it will hold an initial public offering on the London Stock Exchange to sell 25% of its shares to raise $50 million.
While not yet profitable, Trustpilot’s net loss narrowed last year as its revenue rose to $102 million. It’s aiming for a market valuation of 1 billion pounds ($1.4 billion), according to a person close to the company who was not allowed to speak publicly.
People can use Trustpilot to publicly leave feedback for businesses. One of Trustpilot’s selling points is that it doesn’t allow businesses to pick and choose which reviews are published on, or deleted from its platform, as a way to raise trust and transparency.
The company also uses technology to weed out shady posts. Last year it took down 2.2 million reviews deemed to be fake or fraudulent, 70% of which were removed by automated systems.
Trusptilot is going public as a boom in online transactions due to the coronavirus pandemic is driving demand for reviews. The company said in its registration document that COVID-19 has resulted in more web domains carrying Trustpilot reviews as well as more consumer reviews on its platform, though it came at the expense of other businesses hit by the pandemic through store closures, travel restrictions, and social distancing.
The company, which was founded in 2007, says it has hosted more than 120 million reviews for more than 529,000 websites belonging to businesses in more than 100 country and territories. Its biggest markets are the U.K. and U.S.
LONDON (AP) — By KELVIN CHAN
Senate vetting Biden’s choice for SEC head amid stock drama
President Joe Biden’s choice to head the Securities and Exchange Commission is coming before a Senate panel for his confirmation hearing at a moment when a roiling stock-trading drama has spurred clamor for tighter regulation of Wall Street.
Gary Gensler, a chairman of the Commodity Futures Trading Commission during the Obama administration, has experience as a tough markets regulator during the financial crisis. More recently he has been in the academic world. Biden’s selection of Gensler to lead the SEC signals a goal of turning the Wall Street watchdog agency toward an activist role after a deregulatory stretch during the Trump administration.
The Senate Banking Committee is weighing Gensler’s confirmation in a virtual hearing Tuesday. Also being vetted and questioned is Rohit Chopra, a member of the Federal Trade Commission who is Biden’s nominee to lead the Consumer Financial Protection Bureau.
Gensler is promising to work toward strengthening transparency and accountability in the markets. That will enable people “to invest with confidence and be protected from fraud and manipulation,” he said in written testimony prepared for the hearing. “It means promoting efficiency and competition, so our markets operate with lower costs to companies and higher returns to investors. … And above all, it means making sure our markets serve the needs of working families.”
The trading frenzy in shares of the struggling video-game retailer GameStop lifted their price 1,600% in January, though they later fell back to Earth after days of wild price swings. A number of big hedge funds had bet that GameStop stock would fall, only to be thwarted by small investors who banded together on social media with a wave of buying that sent the price up. The saga was portrayed as a victory of ordinary investors over Wall Street giants. But some lawmakers charged that the online trading platform Robinhood acted to favor its big Wall Street clients when it blocked its customers on Jan. 28 from buying GameStop shares.
The SEC is investigating. Treasury Secretary Janet Yellen convened a meeting of top federal regulators to discuss the trading turbulence and whether the way the market operates may hurt individual investors.
Allison Herren Lee, the acting SEC chair, has said the agency is examining the role that short-selling may have played in GameStop’s extreme stock moves, as well as potential stock manipulation and whether companies issuing stocks are adequately disclosing risks to investors.
The GameStop episode has bolstered political momentum in the direction of closer regulation of the securities markets, though Republican lawmakers and regulators generally will oppose new rules. Possible avenues for new rules that have been raised include requiring market players to disclose short-selling positions and restricting arrangements of payment for order flow — a common practice in which Wall Street trading firms pay companies like Robinhood to send them their customers’ orders for execution.
Gensler was a leader and adviser of Biden’s presidential transition team responsible for the Federal Reserve, banking issues and securities regulation. He doesn’t appear to face enough opposition to derail his approval by the full Senate, which the Democrats control by a slim margin.
“Gensler will tip the SEC away from making it easy for companies to raise money and toward protecting unsophisticated investors,” says Erik Gordon, assistant business professor at the University of Michigan.
Jay Clayton, a former Wall Street lawyer who headed the SEC during the Trump administration, presided over a deregulatory push to soften rules affecting Wall Street and the financial markets, as President Donald Trump pledged when he took office. Rules under the Dodd-Frank law that tightened the reins on banks and Wall Street in the wake of the 2008-09 financial crisis and the Great Recession were relaxed. Clayton also eased rules for smaller companies raising capital in the market.
With a background of having worked for nearly 20 years at Goldman Sachs, the Wall Street powerhouse investment bank, Gensler surprised many by being a tough regulator of big banks as head of the Commodity Futures Trading Commission. He imposed oversight on the $400 trillion worldwide market for the complex financial instruments that helped spark the 2008-09 crisis. Gensler pushed for stricter regulations that big banks and financial firms had lobbied against, and he wasn’t afraid to take positions that clashed with the Obama administration.
Among his likely priorities as SEC chair would be requirements for corporations to disclose their climate change risks, political spending and executive compensation. Gensler, who co-authored a 2002 book of investing advice for moderate-income people titled “The Great Mutual Fund Trap,” also could push for protections in ordinary investors’ relationships with their advisers. He may take up tighter rules for new “blank-check” offerings used by companies in developing stages to raise money in the markets, observers say.
Gensler comes armed with receptiveness to new financial technologies and cryptocurrency. As a professor of economics and management at MIT’s Sloan School of Management, he has focused research and teaching on public policy as well as digital currencies and blockchain, the global running ledgers of digital currency transactions.
WASHINGTON (AP) — By MARCY GORDON
Huawei daughter back in Canada court in US extradition case
Lawyers for a senior executive for Chinese communications giant Huawei Technologies were in court Monday arguing evidence should be introduced which would undermine the case to have their client extradited to the U.S.
Canada arrested Meng Wanzhou, the daughter of Huawei’s founder and the company’s chief financial officer, at Vancouver’s airport in late 2018. The U.S. wants her extradited to face fraud charges. Her arrest infuriated Beijing, which sees her case as a political move designed to prevent China’s rise.
The U.S. accuses Huawei of using a Hong Kong shell company called Skycom to sell equipment to Iran in violation of U.S. sanctions. It says Meng, 49, committed fraud by misleading the HSBC bank about the company’s business dealings in Iran. Much of the case centers around an August 2013 PowerPoint presentation made to a HSBC executive during a lunch in Hong Kong.
Defense lawyer Frank Addario asked the court to admit evidence he says shows officials with HSBC were aware of Huawei’s connection to Skycom and another company called Canicula Holdings Inc.
“It was widely known in the bank … that Huawei owned Skycom,” Addario told Associate Chief Justice Heather Holmes. “It sold Skycom to Canicula and thereafter Huawei controlled Canicula’s account at the bank.”
Addario said by omitting this evidence, the U.S. misled Canadian courts.
“The case put to you for the prosecution is the bank’s knowledge came from all these misleading statements by Huawei employees generally,” said Addario. “Once you see all this evidence the picture that emerges is a different picture abut the knowledge of HSBC employees generally and the decision makers.”
Canadian government lawyer Robert Frater told Holmes an extradition hearing is not a trial and said some of Addario’s comments are standard defense cross examination material.
“It is up to a trial to decide if a witness is credible and to determine what officials knew at a certain time. What my friend wants to do is to argue the trial issues,” Frater said.
Meng attended the hearing wearing a mask and an ankle tracking bracelet. She followed the proceedings with an interpreter while reading documents on her lap and taking sips of water.
Over the next several weeks, Meng’s defense team will present several justifications for halting the extradition proceedings.
On Wednesday they will be back in court to argue her arrest was politically motivated and will point to comments made by former U.S. President Donald Trump that he was using Meng as a bargaining chip to force a better trade deal with China.
Canada’s attorney general said in court documents that Trump’s comments were public statements by a president no longer in office about a possible intervention that never occurred.
Later this month, Meng’s lawyers will claim an abuse of process, saying Canada Border Services Agency officers detained and questioned Meng without a lawyer, seized her electronic devices and compelled her to give up the passcodes before her official arrest.
Her lawyers also contend the U.S. is exceeding the limits of its jurisdiction by prosecuting a foreign citizen for actions that took place in Hong Kong and that Canada was misled by the U.S. about the strength of its case.
Meng’s arrest has soured relations between Canada and China. In apparent retaliation, China detained former Canadian diplomat Michael Kovrig and Canadian entrepreneur Michael Spavor. China has also placed restrictions on various Canadian exports to China, including canola oilseed. China also handed death sentences to four Canadians convicted of drug smuggling. Kovrig and Spavor remain jailed. Meng remains free on bail in Vancouver and living in a mansion.
VANCOUVER, British Columbia (AP) — By JIM MORRIS.
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