Sweden, the last remaining stronghold of bitcoin miners in Europe, is ending tax incentives for data centers, also adding 6000% tax increase
The northernmost regions of Norway and Sweden were the last areas where the industry was still profitable and operating because they offered an ideal environment for data centers, with cool temperatures and cheap hydroelectricity.
However, even these remote areas were affected by the energy crisis that caused prices to increase and some miners to turn off their operations.
Energy prices started to normalize in 2023, but the upcoming tax will likely stop any new investment in Sweden, which is currently home to about 150 MW of mining.
The tax will increase from SEK 0.006 ($0.0006) to SEK 0.36 ($0.035) per kilowatt hour (kWh) starting July of this year, according to the financial budget published in November 2022.
This 6,000% increase in taxes per kilowatt hour of energy may “ultimately destroy the industry” in the country, said Jaran Mellerud, senior analyst at mining services firm Luxor Technologies. The tax hike could bring the all-in energy cost to $0.093/kWh based on the average electricity prices last year, Mellerud added.
Hive Blockchain (HIVE), a Canada-based miner with 25% of its energy capacity in Sweden as of the end of 2022, declined to comment on this story. Norway, which hosts 250-300 MW of mining, also increased its taxes from $0.0086 to $0.015 per kWh in January, said Mellerud.
Many miners are looking to diversify elsewhere, as the new tax will drastically reduce their profitability, said Enerhash CEO Daniel Jogg, who operates a site in Sweden.
Some miners could try to get through the tax hike by switching to self-mining instead of hosting others’ machines, said Denis Rusinovich, co-founder of mining consulting firm Cryptocurrency Mining Group. Others are looking at ways to get around the tax by reusing the heat produced in the data centers such that they are taxed as heat producers, Mellerud said.
Those who want to pack up are facing an uphill battle because the market of potential buyers has dried up, said Rusinovich.
It is unclear whether Sweden’s new taxes were intended towards miners or the entire data center industry. The tax hike was proposed by the Swedish Ministry of Finance, which was also pushing for a ban on bitcoin mining in the European Union last year, Mellerud pointed out.
“This could be viewed as an attack on bitcoin mining,” he said. In 2017, Sweden enacted a 98% tax cut for data centers, looking to attract businesses. Four years later, the industry has not created the jobs the country was hoping for, and the macroeconomic environment has changed, said the budget report.
The energy crisis has increased electricity rates for households, and the tax cuts currently in place might actually be taking away energy from other, more job-creating industries in the manufacturing sector, said the budget.
Sweden Crypto Mining 6000% tax Hike
The tax hike is expected to make mining in the region “prohibitively expensive in Sweden and could ultimately destroy the industry,” said Mellerud. Bitcoin miners are now looking for solutions to keep their business running.
While some miners are trying to find ways to get around the tax, others are looking to diversify elsewhere. Norway, with its overall cheaper energy and more modest tax hike, is still a viable option for bitcoin miners. The industry will continue developing there, said Denis Rusinovich.