• Scandinavia last stronghold for crypto miners
• Sweden wants to abolish tax breaks for data centers
• Taxes in Norway also already increased
The past year has been one to forget for the crypto sector. In addition to the fall in the price of many cryptocurrencies and numerous negative headlines from the sector, Russia’s war of aggression against Ukraine and the associated rising energy prices primarily impacted the business of crypto miners around Bitcoin & Co.
Advertising
Trade Bitcoin and other cryptos via CFD (also with leverage)
At Plus500 you can benefit from rising and falling crypto prices – also with leverage. Test the free demo account now!
Plus500: Please note the Hints5 to this advertisement.
In Europe, Scandinavia was one of the last strongholds for crypto miners due to its low energy costs. However, crypto miners seem to have been a thorn in the side of one of the Nordic countries for a long time and it could be that they will soon to look for new locations.
Sweden wants to abolish tax breaks
Back in 2021, Sweden had reported that crypto miners are keen to use more renewable energy and are turning their focus to the Nordic region due to low electricity prices, cheap taxes for mining activities and good access to renewable energy. However, Sweden stated that the country needs this renewable energy itself for climate protection and that “increasing use by miners” is threatening Sweden’s ability to “meet the Paris Agreement”. The directors-general of the Swedish Financial Supervisory Authority and the Swedish Environmental Protection Agency therefore came to the conclusion that “the energy-intensive mining of crypto assets […] should therefore be banned”.
And so Sweden, which CoinDesk says currently has around 150 megawatts of mining activity, according to its 2023 budget released in early November 2022, plans to scrap its data center tax breaks starting July this year. This would mean that the tax costs for affected companies would rise significantly. The tax rate, which is currently SEK 0.006 per kilowatt hour, is set to rise to SEK 0.36 per kilowatt hour from July 1 – an increase of around 6,000 percent.
Jaran Mellerud, a senior analyst at mining services company Luxor Technologies, explains how CoinDesk reports that the tax increase could take total energy costs as low as $0.093 per kilowatt-hour based on last year’s average electricity prices.
Impact on the mining industry
This development should also put Europe’s bitcoin miners under further pressure after the increased energy prices had already weighed on the industry last year. The tax increase makes mining “prohibitively expensive in Sweden and could ultimately destroy the industry,” Mellerud said, according to CoinDesk, which is why bitcoin miners are looking for solutions. For them, it could mean looking for new locations again. Daniel Jogg, CEO of Enerhash, which operates a site in Sweden, agrees, believing the new tax will drastically reduce miners’ profitability. In addition, companies are required to pay a few months in advance. According to Jogg, this could lead to serious liquidity bottlenecks at a difficult time for the industry.
Denis Rusinovich, co-founder of mining consultancy Cryptocurrency Mining Group, believes some miners may try to survive the tax hike by switching from hosting machines to self-mining, CoinDesk reports. According to Mellerud, some may also be looking for ways to avoid the tax. For example, they could reuse the heat produced in the data centers in such a way that they would be taxed as heat generators.
One of the miners affected by the change in Sweden from July is Canadian miner HIVE Blockchain, which owns “state-of-the-art, green-energy-powered data center facilities in Canada, Sweden and Iceland,” which “continuously re-mint digital Produce currencies like Bitcoin and Ethereum in the cloud,” according to the company’s website. As of the end of 2022, the company was using around a quarter of its mining capacity, namely 37.5 megawatts, in Sweden.
As CoinDesk reports, firms like HIVE touted Sweden as a “stable” jurisdiction where they don’t worry about abrupt unilateral changes to the regulatory regime. But now the miners are disappointed with how the tax increase was introduced. Apparently there was little advance notice or communication. The US company Microsoft, which also operates data centers in the region, has protested against the abruptness of the measure, according to CoinDesk. According to Cryptocurrency Mining Group’s Denis Rusinovich, there has been no official notification to bitcoin miners operating in the region, only a page on the tax agency’s website has been updated to reflect the change. According to Jaran Mellerud, Sweden’s move “could be seen as an attack on Bitcoin mining.”
Taxes in Norway also increased
Sweden’s neighbor Norway, which is home to 250-300 megawatts of mining capacity according to CoinDesk, also raised its taxes from $0.0086 to $0.015 per kilowatt-hour in January, according to Mellerud. But all hope is not lost for Norway, in his opinion, since Norway’s energy is cheaper overall and the tax increase is more modest. Rusinovich also believes that the industry there will continue to develop.
Editorial office finanzen.net
Leverage must be between 2 and 20
No data
Image sources: lp-studio / Shutterstock.com, 3Dsculptor / Shutterstock.com