The industry in the country could be “ultimately destroyed” by the 6,000% surge in taxes per kilowatt hour of energy.
The bitcoin mining industry in Europe’s final bastion, Sweden, could be dealt a fatal blow as tax incentives for data centers are set to be eliminated in July.
Energy prices in Europe have experienced a significant surge in the past year, largely due to the war in Ukraine. The resulting energy crisis has forced many industries, including bitcoin mining, to shut down their operations or relocate to more affordable regions.
However, the northernmost regions of Norway and Sweden had been some of the last remaining areas where bitcoin mining was still profitable and operating. These regions provided an ideal environment for data centers, with cool temperatures and access to cheap hydroelectricity.
Despite this advantage, the energy crisis eventually caught up with even these remote areas of Europe. As energy prices continued to rise, some bitcoin miners had to turn off their operations or relocate elsewhere to remain profitable. In 2022, these regions saw a decline in bitcoin mining activity, at least partly due to the increasing energy prices.
In 2023, energy prices began to stabilize, but an impending tax hike could discourage new investments in Sweden. The country is currently home to around 150 MW of mining. According to the financial budget released in November 2022, the tax will increase from SEK 0.006 ($0.0006) to SEK 0.36 ($0.035) per kWh starting in July of this year.
Jaran Mellerud, a senior analyst at mining services firm Luxor Technologies, estimates that based on last year’s average electricity prices, the tax hike could raise the all-in energy cost to $0.093/kWh. He adds that a MicroBT Whatsminer M30s, a commonly used and moderately efficient machine, would break even under current market conditions.
Hive Blockchain, a Canadian mining company with 25% of its energy capacity located in Sweden as of the end of 2022, declined to comment on this story. CoinDesk was unable to find any of Hive’s filings that explicitly disclosed the tax hike. The company has previously expressed disagreement with the Swedish Tax Authorities over $32.4 million in VAT that it believes it should recover.