Bitcoin Mining a Growing “Waste of Energy” in Iceland

Neither Icelandic authorities nor data centres in Iceland will reveal how much energy is used to mine Bitcoin or other digital currencies in Iceland, Snæbjörn Guðmundsson of nature conservation organisation Náttúrugrið told Vísir. Data centres use 30% more energy in Iceland than all Icelandic homes put together, and while the percentage of this energy that goes toward Bitcoin mining is not public knowledge, it could be as high as 90%.

Iceland’s abundance of renewable energy and cheap power has had both data centres and Bitcoin mining operations flocking to the country in recent years to set up shop. Iceland’s cool climate is another benefit, as data centres produce a lot of heat that would require additional energy to cool if located in a warmer climate. Both politicians and environmental activists have questioned the benefit of Bitcoin and digital currency mining operations for the Icelandic nation as well as their impact on the environment.

New hydropower plant could be used to mine Bitcoin

A 2018 report by KPMG stated that around 90% of energy used by data centres in Iceland had gone toward mining Bitcoin. In a column in Vísir, Snæbjörn refers to a recent analysis by Bitcoin expert Jaran Mellerud, who estimates that Bitcoin mining in Iceland uses around 120 MW of power, or around 85% of the 140 MW of power used by the country’s data centres in 2022. These figures have not changed much in recent years despite assertions from Iceland’s National Power Company (Landsvirkjun) that they would reduce the sale of Iceland’s energy to Bitcoin mining operations.

Snæbjörn is concerned that the proposed Hvammsvirkjun hydropower plant in South Iceland’s Þjórsá river would be used to power further Bitcoin mining in Iceland, although the National Power Company has stated that power plants would not be built solely for the energy needs of Bitcoing mining centres.

New York-based Bitcoin mining company told the Wall Street Journal last month that they would expand their operations in Iceland in response to an impending tax on Bitcoin mining in the United States. At the same time, Icelandic energy companies have stated there is no capacity for increased digital currency mining in the country.

“This is a waste of energy that should not be happening in a society like the one we live in today,” Snæbjörn stated.

Electricity Shortage in Iceland Impacts Local Industry and Data Centres

Low cost of electricity in Iceland compared with the rest of Europe

Iceland’s National Power Company has made a sudden decision to reduce electricity supply to industrial operations, including fishmeal factories, aluminium smelters, and data centres, RÚV reports. The decision was made due to an energy shortage caused by a series of issues, including a problem at a power station, low hydro reservoir levels, and limited transmission capacity. The affected companies have either had to reduce operations or switch to other power sources such as oil.

Data centres reduce operations

The National Power Company initially stated that cuts would be made in January, but decided yesterday that the supply would be reduced immediately. Sigríður Mogensen of The Federation of Icelandic Industries (SI) says the cuts have had an immediate effect on data centres. “We know of cases where Icelandic data centres have unfortunately had to close down customer service [yesterday]; early in the morning after this information became available. That means an immediate loss of revenue and we can keep in mind that the data processing industry generates at least ISK 20 billion in foreign exchange earnings for the national economy annually.”

Iceland’s abundance of low-cost, renewable energy and low average temperatures that minimise the need for cooling systems have made it an attractive destination for data centres and cryptocurrency mining operations in recent years. Sigríður added that the current cuts could have a long-term impact on the industry by leading potential customers to question energy security in Iceland. “This main this is that this is a definite loss for the economy and we need to learn the lesson from this to plan further ahead.”

Fishmeal factories switch to oil

CEO of Síldarvinnslan fishmeal factories, located in East Iceland, says the cuts will not impact production levels but will affect cost for the company, which will have to rely on oil for power. “Oil prices are high at the moment, whereas the price of electricity has taken into account that it is curtailable as it is now. So this will bring a rise in cost.” The capelin season is around the corner, meaning that fishmeal factories will have high energy needs.

Cryptocurrency Not Supervised By Financial Supervisory Authority

Central Bank of Iceland

The Central Bank of Iceland’s Financial Supervisory Authority has no supervision over cryptocurrency mined in Iceland, Fréttablaðið reports. A considerable portion of the world’s supply of bitcoin, or up to 8%, is mined in data centres in Iceland.

The Financial Supervisory Authority has no information on and does not supervise cryptocurrency mined in Icelandic data centres. It’s believed that up to 8% of bitcoin is mined in Iceland. Around 60 companies mine bitcoin in Iceland but only the three service providers offering electronic currency trade and digital wallets are required to register with the Financial Supervisory Authority.

While cryptocurrency has been lauded as an ultra-secure decentralised mode of payment, it has come under fire for being ill-regulated and wasteful of energy. US authorities have increasingly tried to supervise the use of cryptocurrency as they are thought to be the cornerstone of various illegal operations, including terrorism, drug trade and the distribution of child pornography. Mining cryptocurrency requires a great deal of energy use. Around 5% of Iceland’s energy production is tied in data centres and around 90% of data centre operations centre on cryptocurrency mining.

When asked about cryptocurrency supervision, The Central Bank of Iceland’s Financial Supervisory Authority replied that as cryptocurrencies aren’t legal tender or currency in Iceland so they aren’t subject to legislation on payment services or electronic currency. “Cryptocurrency markets don’t require a licence, they are not subject to laws no. 108/2007 on stock exchanges and aren’t subject to Central Bank of Iceland’s Financial Supervisory Authority’s supervision.” Furthermore, the Central Bank does not have any information on the extent of cryptocurrency trade. Even if the Financial Supervisory Authority does not supervise cryptocurrency trade, they warn against its use.

Read more on bitcoin mining in Iceland.

Runaway Confesses to Bitcoin Robbery

Sindri Þór Stefánsson - bitcoin

Sindri Þór Stefánsson, accused of partaking in the robbery of millions of dollars worth of Bitcoin mining equipment, has confessed to two counts of breaking and entering. RÚV reports that Sindri changed his testimony before the court case began yesterday morning. He says, however, that he did not organise the robbery.

Sindri was being held at low-security prison Sogni earlier this year under suspicion of involvement in the robbery. He escaped the detention centre and fled the country, but eventually turned himself in to police.

Sindri stated that he had originally contacted the individual who organised the robbery because he was hoping to set up a Bitcoin mining centre and was looking for an investor. The individual then suggested the robbery as a way to reduce competition. Sindri stated he believed it was a good idea at the time as he was facing financial difficulties.

Sindri stated he would not reveal the identity of the man behind the robbery, as it could have worse consequences for him and his loved ones. He added that he would return the stolen computers if he knew where they were located. Sindri told the country that the past year has been the most difficult of his life, and that he is no longer the same person he was before being placed in solitary confinement in prison.

First Cryptocurrency Exchange Registers with Financial Supervisory Authority

The first company to specialize in cryptocurrency commerce and services is now registered with Iceland’s Financial Supervisory Authority, or FME, reports KjarninnMorgunblaðið reported first.

The company, Skiptimynt, is a cryptocurrency exchange dealing in Bitcoin and Auroracoin. Cryptocurrency firms are now required to register their activities with FME, following new legislation intended to combat money laundering and terrorist activities.

Crypto- or digital currencies have gained increased popularity on the international market in recent years, although the value of most have been subject to extreme fluctuations. The value of one Bitcoin is now roughly ISK 770,000 ($6,958/€5,986), but was worth as much as ISK 2,216,800 ($20,000/€17,208) at one point last year.