AP – Iceland is expected to use more energy “mining” bitcoins and other virtual currencies this year than it uses to power its homes.

With massive amounts of electricity needed to run the computers that create bitcoins, large virtual currency companies have established a base in the North Atlantic island nation blessed with an abundance of renewable energy.

The new industry’s relatively sudden growth prompted lawmaker Smari McCarthy of Iceland’s Pirate Party to suggest taxing the profits of bitcoin mines. The initiative is likely to be well received by Icelanders, who are skeptical of speculative financial ventures after the country’s catastrophic 2008 banking crash.

“Under normal circumstances, companies that are creating value in Iceland pay a certain amount of tax to the government,” McCarthy told The Associated Press. “These companies are not doing that, and we might want to ask ourselves whether they should.”

The energy demand has developed because of the soaring cost of producing and collecting virtual currencies. Computers are used to make the complex calculations that verify a running ledger of all the transactions in virtual currencies around the world.

In return, the miners claim a fraction of a coin not yet in circulation. In the case of bitcoin, a total of 21 million can be mined, leaving about 4.2 million left to create.

As more bitcoin enter circulation, more powerful computers are needed to keep up with the calculations — and that means more energy.

The serene coastal town of Keflavik on Iceland’s desolate southern peninsula has over the past months boomed as an international hub for mining bitcoins and other virtual currencies.

Local fishermen, chatting over steaming cups of coffee at the harbor gas station, are puzzled by the phenomenon, which has spawned oversize construction sites on the outskirts of town.

Among the main attractions of setting up bitcoin mines at the edge of the Arctic Circle is the natural cooling for computer servers and the competitive prices for Iceland’s abundance of renewable energy from geothermal and hydroelectric power plants.

Read more:

Bitcoin mining causes electricity troubles in China – fresh crackdown ahead?

Can Venezuela’s cryptocurrency ‘petro’ lift the economy, after all?

Bitcoin and tax: US court outlines IRS’ powers regarding Coinbase

VIEW THE FULL ARTICLE