Sweden to eliminate incentives for bitcoin miners, raising electricity tax by 6,000%
Sweden is doing away with tax incentives for data centers come July 2023. This decision could affect bitcoin (BTC) miners who had turned to the Nordic country to increase their profitability.
Sweden is eliminating tax incentives for bitcoin miners
Sweden has been a hub for bitcoin miners over the last year and is one of the last remaining strongholds in Europe. Energy prices across the continent have been rising primarily due to the ongoing war in Ukraine. Because of this, most bitcoin miners have been flushed out.
Norway and Sweden, the northernmost regions of the continent, remained the last areas still profitable and operational for bitcoin miners. The reason was the ideal setting for data centers, such as cool temperatures and access to cheap renewable hydro power.
Sweden is now abolishing tax incentives that could inhibit new investments in the zone. Based on the November 2022 financial budget report, Sweden will increase electricity tax from SEK 0.006 ($0.0006) to SEK 0.36 ($0.035) per kilowatt hour (kWh) come July 2023. Currently, Sweden is home to miners who use around 150 megawatts (MW) of power.
Jaran Mellerud, a senior analyst at Luxor Technologies, a crypto mining provider, said raising this tax would increase electricity costs to $0.093/kWh. Further, he added placing electricity costs at such levels means using MicroBT Whatsminer M30s, a moderately efficient bitcoin mining chipset, would only break-even at current market conditions.
Targeting bitcoin miners
Following this move, Frances Coppola said crypto supporters could interpret the move as an attack. Since Sweden introduced a 98% tax cut for data centers in 2017, the pace of job creation has been lower than expected four years down the line.
Based on the budget, the energy crisis has raised household electricity rates. Therefore, any attempt to cut tax will be taking away energy from other manufacturing industries, which are prolific in creating jobs.
Microsoft and Hive, which both have data centers in the region, have protested the abrupt measures considering the government had commissioned a report on data centers’ energy impact, which is currently incomplete.
Moreover, the tax implementation will happen mid-year, making it hard to plan. They also complain that there was no official communication to active bitcoin miners in the region. Instead, only a page on the tax authority’s website highlighted the change.