Iceland leads the pack when it comes to cryptocurrency mining. Surprisingly, the island nation known for its super cold weather is now a global powerhouse in the industry when it comes to the mining of these digital currencies. With this boom, however, comes the worry that the highly volatile sector might even put its economy in danger.
Iceland’s Appeal to Miners
It’s the perfect combination of three major factors that makes Iceland so attractive for crypto mining companies. The nation has one of the lowest power rates in all of Europe. Since mining consumes a lot of electricity, it would make sense to locate its operations in countries with low power rates.
The country also gets all of its power from renewable sources, which help mining firms score some corporate responsibility points by going green. Since Iceland’s weather is already very cold, putting up mining facilities in Iceland saves a lot in the cooling costs of all those overworked mining rigs.
While everything is working just fine these days in Iceland’s crypto mining sector, officials can’t help but worry what happens if all these fast-growing mining activities start to collapse. Said Finance Minister Bjarni Benediktsson:
“It cannot be excluded as a risk factor … it might affect our economy if it’s a sector that continues to grow and collapses.”
This cautious stance is understandable coming from a country that suffered a devastating financial crisis a decade ago. Simply put, the government and its officials are a bit worried that a cryptocurrency boom and its accompanying frantic mining activity might likewise push the nation’s economy towards another crisis if a sudden collapse of the market was to happen.
Crypto Mining Will Have Limited Effect on Energy Sector
Power usage from cryptocurrency mining is projected to soon outstrip power usage by all of Iceland’s homes combined. Crypto mining is projected to consume 840-gigawatt hours of electricity annually, while electricity consumption for home use is only 700-gigawatt hours. The fear is that the higher power demand might push up power rates, which may affect the nation’s wider economy.
When viewed on a national level, however, cryptocurrency mining power consumption will remain relatively small at a mere 2 to 3 percent to the national output. As such, any increase in crypto mining’s power needs is not going to have a very noticeable effect. In fact, the country’s aluminum smelters, with its 70-percent allocation of the nation’s energy supply, take a much bigger slice of the power pie.
Also, should mining companies decide to suddenly cease operations and pull out from the country due to unforeseen circumstances, it might only have some limited effect on the overall national labor pool. The reason for this is that crypto mining is not a very labor-intensive enterprise. This means that the closure of mining firms will only have a very limited effect on the unemployment rate.
Of course, Iceland officials are not likely leaving anything to chance. Having survived one of the worst financial crisis in recorded history, any risk that may affect the nation’s financial wellbeing is worth investigating.