A new resolution made by the Norwegian government has seen an end to the power subsidy that Bitcoin miners were granted in the Scandinavian country. According to a report from local news outlet Aftenposten, the government has warned miners that the honeymoon ends this year. Starting next year, Bitcoin miners in the country will have to pay the regular electricity tax.
Under the current subsidy, larger mining firms enjoy a significant discount on their electricity bills as other power-intensive firms in the Norwegian economy do. Any firm that has a capacity greater than 0.5 megawatts will only get a measly charge of 0.48 øre (equivalent to $0.00056) per kilowatt hour, as opposed to the standard 16.58 øre ($0.019) per kilowatt hour rate.
The move to scrap the subsidy on Bitcoin miners was reportedly spurred by the Norwegian Tax Administration, which acts as an agent of the Norwegian finance ministry. This subsidy means that Bitcoin miners in the Northern European country have been paying just 2.8% of the standard electricity rate to carry out their operations. The removal of this subsidy increases their cost considerably, as they will start paying the standard rate if they hope to continue mining under the same conditions, which is doubtful.
Politicians Hate the Subsidy
Some Norwegian politician seems to be excited with the news as they consider it good riddance to bad rubbish.
In the report, Lars Haltbrekken, a representative of the Norwegian parliament, argued:
“Norway cannot continue to provide huge tax incentives for the dirtiest form of cryptographic output like Bitcoin. It requires a lot of energy and generates large greenhouse gas emissions globally.”
With the recent crash in bitcoin prices, the last thing any miner wants is an increase in their power bills. Just last week, Washington’s Chelan County Public Utility District (PUD) told crypto miners operating in the county they would have to fork out more money, as the power company is starting to feel the weight of wear and tear on its infrastructure.
The tech sector in Norway stood firm against the Ministry of Finance, criticizing the move, which it believes is insensitive at best and instead, has called on the government to provide support for the emerging blockchain and cryptocurrency ecosystem in the country.
Roger Schjerva, the chief economist at local interest group ICT Norway, was quoted by Aftenposten saying:
“This is shocking! [To change] framework conditions without discussion, consultation or dialogue with the industry. Norway scores high on rankings of political stability and predictable framework conditions, but now the government is playing a gambling role with its credibility.”
Nonetheless, there are also some people within the Norwegian blockchain industry who also seem to agree with the move of the government.
Jon Ramvi, CEO of Blockchangers, a blockchain advisory group based in Oslo, believes “less mining in Norway will reduce the prices of electricity for companies and people residing in Norway, meaning that we reap the benefits of these resources locally instead of giving it away to Bitcoin miners.” Miners chose Norway due to its access to cheap power.
According to Northern Bitcoin, a German Bitcoin mining firm with operation centers in Norway, the average cost of mining Bitcoin in Norway is $7,700 per coin, with the current crash and the subsidy removal, it’s almost impossible to break even, not to mention, making a profit in the Scandinavian nation.
The country has been a haven for Bitcoin miners for months now, due to its provision of fjord-based cling systems and cheap renewable energy.
Norway will likely see an exodus of Bitcoin miners leaving its shores, as the subsidy was a major attraction that enticed most of these firms earlier this year.
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