According to a report from the Associated Press, Iceland is set to consume more energy mining cryptocurrencies, than it will powering the houses of the island’s 340,000 residents this year. In light of these facts, lawmaker Smari McCarthy of the country’s Pirate Party suggested taxing the profits of bitcoin mining companies.
Cryptocurrency mining companies choose Iceland because of the country’s cold climate, and its access to renewable energy such as geothermal. Miners set up their ‘farms’ at the edge of the Arctic Circle which provides a natural cooling method to stop the machines overheating from the computation-heavy hashing algorithms.
Given the Nordic island’s abundance of renewable energy from geothermal and hydroelectric power plants, electricity costs are low. Johann Snorri Sigurbergsson, a businessman ahead of energy company Hitaveita Sudurnesja, predicted the country’s energy consumption in cryptocurrency mining will double to 100 megawatts this year.
He even revealed he was being contacted by bitcoin mining companies. He said:
"Four months ago, I could not have predicted this trend — but then bitcoin skyrocketed and we got a lot more emails. Just today, I came from a meeting with a mining company seeking to buy 18 megawatts.”
Given their interest in the country, McCarthy brought up the possibility of taxing bitcoin miners, after considering they are “creating value” within the country.
McCarthy was quoted as saying:
"Under normal circumstances, companies that are creating value in Iceland pay a certain amount of tax to the government. These companies are not doing that, and we might want to ask ourselves whether they should."
The lawmaker’s Pirate Party currently holds 6 seats out of 63 in the Althing, Iceland’s parliament. Alone it won’t be able to push any kind of bitcoin mining tax. The idea, however, may gain traction among other lawmakers who may make it happen. It is likely that smaller nations will follow tax laws set by the US, currently mining is classed as income and can be taxed at the to bracket of 37.5%.
McCarthy further questioned the value bitcoin brought the Icelandic society, defending the idea of taxing the profit mining companies make, adding:
"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. That can't be good.”
Helmut Rauth, who managed operations at Genesis Mining, a cryptocurrency mining company founded in Germany that moved to Iceland in 2014, disagreed with the lawmaker’s proposal. According to him, bitcoin shouldn’t be singled out as environmentally taxing, as computing power always consumes energy. He argued:
“How much energy is needed for credit card transactions and internet research? Cryptocurrencies have the same global impact."