The volatility of bitcoin could threaten the economy of Iceland

Despite the remote position of the volcanic Islands, the economic impact of the cryptocurrency mining industry is significant for Iceland.

The country’s dependence on mining is becoming a factor that «can not be excluded when assessing the risks,» said Finance Minister of Benediktsson Bjarni (Bjarni Benediktsson). He expressed his concern about the fact that in the case of the end of the cryptocurrency boom, the economy of Iceland may suffer.

Due to its cool climate, perfect for cooling computer equipment, Iceland has long been recognized as the most suitable country in the world for cryptocurrency mining. In addition, it became the first state that uses more electricity for mining than for food households.

The cold temperature of Iceland provides the ideal conditions for the powerful computers used in cryptocurrency mining. The company is involved in mining in the country, can significantly save on costs for air conditioning, compared to firms operating in a warm climate. In addition, renewable hydropower and geothermal energy Iceland, fed by the volcanoes of the island, is the perfect fuel for an extremely energy intensive process of mining bitcoins.

Economic activity caused by the mining of cryptocurrencies, contributed to the country’s recovery after the financial crisis of 2008, which hit Iceland particularly hard.

Ideal conditions mean that the interest of miners to Iceland continues to grow, said Styrmir, Halison (Styrmir Hafliðason), Manager of safety and quality in the data center Verne Global, stating that «we receive several requests a week».

The increased interest and the truth is hard to deny. According to the report
KPMG, last year 90% consumed by the data centers energy accounted for cryptocurrency miners. KPMG noted that the interest of such companies to the country will continue to grow.

However, due to the disproportionate presence of miners in the Icelandic economy the speculative value of the cryptocurrency threatens Iceland, according to the same report, where market prospects are described as «fragile.»

In addition, this situation also carries certain risks, according to Johann Snorri’s Sigurbergsson (Johann Snorri Sigurbergsson), representative of the Icelandic energy company HS Orka. The cryptocurrency mining industry consumes up to 840 gigawatt-hours of electricity per year to support their servers and cooling equipment, which is a huge boon to national electricity companies. This is two to three percent of total electricity consumption on the island.

However, the dangers are not just mining. The real risk, according to Magnus Eyjolfur (Magnus Eyjolfur) of IT company Advania is the country’s dependence on another industry, which draws geothermal energy, aluminum smelters, which use about 70% of all electricity in the country.

Iceland really is more and more associated with the mining of cryptocurrencies, which, of course, attracts the attention of the authorities. For example, in February this year the Deputy of the Parliament of Iceland’s Pirate party has offered
to introduce a new tax for mining companies.

 

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