/Tax on Crypto Mining Shoos Away $11.70 Million Foreign Investment

Tax on Crypto Mining Shoos Away $11.70 Million Foreign Investment

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NTC Services AS revealed that a foreign investor had stopped an $116 million investment into a crypto mining facility which was going to be built in Norway’s Tydal municipality.

The data center consultancy told E24 that the investor went cold feet after hearing about the Norwegian government’s decision to exempt crypto mining centers from electricity tax subsidies. He decided to cancel the arrangement that took several staff-years to reach a balanced conclusion.

“It was about one billion [NOK] in investment,” explained Erik Vennemoe, partners with NTC Services. “Everything was planned, and the data center should have been in operation as of July next year. Then the statement came from the government, and then it stopped the next day.”

As reported on CCN earlier, the Norwegian government ruled by the Christian Democratic Party (KRW) took a unilateral decision to call off tax subsidies given to data centers involved in cryptocurrency mining. They believed that crypto centers were consuming a whole lot of power compared to any other form of data centers. A parliamentary representative even called bitcoin “the dirtiest form of cryptographic output,” making it clear that they were not happy with the ways things were going in Norway’s local crypto mining sector.

“It requires a lot of energy and generates large greenhouse gas emissions globally,” said Lars Haltbrekken.

The Norwegian government also cleared that it only wants to extract unnecessary tax subsidies to allocate a huge portion of tax collection towards generating jobs and arrange capital for other people-centric initiatives.

Shutdown Likely

Now with an end to the allowance, bitcoin miners will have to hand over a good percentage off their mining rewards to the government as taxes. The decision has made Norway one of the least attractive destinations to begin a mining pool, especially when their neighboring countries continue to be mining-friendly.

Vennemoe fears that all the investments promised to Norway would now move to Sweden, Denmark, and Finland.

“These countries offer so far low fees to all types of data centers, including those who use crypto,” he said.

As of now, it costs about $7,700 to mine one Bitcoin in Norway, which is almost half the current rate of the digital currency. In comparison, Suadi Arabia and China offer the cheapest mining options, with each bitcoin unit costing about $3,100 to mine. It explains that Norway bitcoin mining community was already undergoing huge losses.

Jon Ramvi, chief executive of blockchain advisory group Blockchangers, supported the government’s decision, saying that the bitcoin network didn’t need more miners than it already has.

“The only function of more miners is securing the network further,” he added. “It means that if you want to hack the network, you will need to have more computational power than the other machines in the network. However, the Bitcoin network has been extremely secure for over a year now so there should be no need for more miners.”

The Norwegian mining companies are now left with two options: either move to other countries or shut down their operations entirely. They are less likely to make any profit unless bitcoin price forms parity with the cost of mining, anyway.

Update 11/28: Corrected figures

Featured image from Shutterstock

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