Energy riches fuel bitcoin-mining craze for speculation-shy Iceland

Bitcoin Mining Tax

Brennan Linsley

The development of the mining organizations in Iceland has prompted the lawmaker of its Pirate Party, Smari McCarthy to bring up the idea of taxing the profits of bitcoin mines.

However, Icelandic energy company HS Orka has admitted that it may not be able to generate enough electricity in order to satisfy demand.

Some have questioned how beneficial the rise of the crypto-currency mining will be to Iceland.

"What we're seeing now is...you can nearly call it exponential growth, I think, in the [energy] consumption of data centers", Johann Snorri Sigurbergsson, an HS Orka spokesman, told the BBC.

China and South Korea have already banned bitcoin mining due to problems with a lack of control over fraud and money laundering, and in China's case, concern over the amount of power that the activity sucks from the electricity grid.

In Iceland, bitcoin mining operations are about to take a greater share of the country's energy generation than homes.

Beyond its obsession with finance - Iceland was a center of the global derivatives meltdown in 2008, a catastrophe which saw some local bankers jailed - the tiny country of 340,000 people is drawing cryptocurrency companies because of its cheap energy.

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Power consumption from servers used to mine Bitcoin and other cryptocurrencies is set to overtake domestic power usage in Iceland this year as miners relocate from Asia to take advantage of the country's low fixed costs for electricity.

"These companies are not doing that and we might want to ask ourselves whether they should".

"Sigurbergsson told the AP that he "could not have predicted this trend" four months ago...but then Bitcoin skyrocketed". "The value-to-Iceland/value-generated ratio is virtually zero". "Just today, I came from a meeting with a mining company seeking to buy 18 megawatts", he said.

'We are spending tens or maybe hundreds of megawatts on producing something that has no tangible existence and no real use for humans outside the realm of financial speculation, ' he said.

The AP story said that McCarthy was starting to think about whether bitcoin firms should be taxed as a result.

They are the source of the Icelandic bitcoin miners' income - a revenue source many Icelanders are still not quite sure what to make of, especially if the lights start flickering.

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