Norwegian news outlet Aftenposten reported recently that the government wants cryptocurrency miners to have standard power tariffs instead of their previously subsidized rates. The revised power rates will be effective from the New Year, raising the power liability of the miners significantly and affecting their profitability. By current subsidized rates, miners were paying barely 3 percent of the standard rates in the country.
How Much Do Miners Pay?
In Norway, large and power-intensive industries with a capacity of more than 0.5 megawatts have to pay 0.48 øre ($0.00056) per kilowatt hour (1 øre is 1/100th of the Norwegian krone). Other businesses have to pay the standard rate of 16.58 øre ($0.019) per kilowatt hour. Most eligible miners were paying only 2.8 percent of the standard power rates to the government, but now, their liabilities will increase drastically.
Lars Haltbrekken, the Norwegian parliamentary representative, commented on the low power rates paid by miners, saying:
“Norway cannot continue to provide huge tax incentives for the most dirty form of cryptographic output like bitcoin. It requires a lot of energy and generates large greenhouse gas emissions globally.”
The suggestion to increase miners’ tax burden comes from the Norwegian Tax Administration working under Norway’s Ministry of Finance. Their proposal has also been accepted and will go into effect in January.
Why It’s Bad for the Mining Business?
Crypto miners are already going through tough times. Prices of cryptocurrencies have fallen throughout during 2018, which has consistently eroded the profits earned by the mining rig operators. Last week, a fork of Bitcoin Cash led to another fall in the market. On Monday, the crypto market wiped billions off its valuation. The price of one Bitcoin is hovering just below $4,300 which is causing more trouble for the miners.
With an increase in their electricity payments, the miners will have to shell out a larger paycheck to the authorities. This move will further erode their profits. The jump from 0.48 øre to 16.58 øre is quite significant, which could totally transform the economics of cryptocurrency mining in the country.
A US-based Bitcoin mining firm Giga Watt brought more sad news for the industry this Monday as it declared bankruptcy. The company still owes over $7 million to its 20 biggest unsecured creditors.