Norway has scrapped a subsidy granted to cryptocurrency miners in the country, which could result in spiraling energy costs for operators the sector.
As reported by local news outlet Aftenposten, crypto mining companies will be required to pay standard electricity tax from 2019, after the government decided to remove the effective subsidy from its latest budget.
The development will pose serious problems for miners in Norway, who currently pay an effective 2.8% of the market rate for their energy. With the removal of the discount, which currently applies to several energy intensive industries in the country, miners will now have to stump up the full costs like most other businesses.
The news comes at a time of increasing difficulties for crypto miners, particularly Bitcoin Core (BTC), worldwide, with the collapse in BTC prices in particular pushing many to the brink and beyond. This week, U.S. mining firm Giga Watt became the latest high profile casualty, after filing for bankruptcy with debts of somewhere between $10-$50 million.
Scrapping the subsidy will mean firms that are currently paying just 0.48 øre ($0.00056) per kilowatt hour will have to pay at the standard rate, equivalent to 16.58 øre ($0.019) per kilowatt hour.
With power one of the main expenses for mining firms, the removal of the subsidy is likely to be another heavy body blow as the industry continues its wider decline.
Lars Haltbrekken, a representative of the Norwegian parliament said Norway could not continue to subsidize ‘dirty output’ like cryptocurrency. He declared, “Norway cannot continue to provide huge tax incentives for the most dirty form of cryptographic output like [BTC]. It requires a lot of energy and generates large greenhouse gas emissions globally.”
The announcement came without notice, with some analysts suggesting the change was made “without discussion, consultation or dialogue with the industry,” reflecting the increasing hostility from governments to cryptocurrency-focused businesses. Neighbouring jurisdictions may now look to follow Norway’s lead, in a bid to discourage the environmentally taxing process of mining for cryptocurrencies like BTC.
With the budget having passed through parliament, the chances will come into effect for remaining mining businesses from January.
Note: Tokens on the Bitcoin Core (segwit) Chain are Referred to as BTC coins. Bitcoin Cash (BCH) is today the only Bitcoin implementation that follows Satoshi Nakamoto’s original whitepaper for Peer to Peer Electronic Cash. Bitcoin BCH is the only major public blockchain that maintains the original vision for Bitcoin as fast, frictionless, electronic cash.
Effective Oct. 15, cryptocurrency-related companies in Norway—including branches of multinational companies—will have to adhere to a new set of anti-money laundering regulations (AML) set by the Financial Supervisory Authority of Norway, also known as the Finanstilsynet.
The new regulations apply to cryptocurrency storage services and providers offering exchange services between cryptocurrencies and fiats, as well as “platforms that facilitate trading and exchanges by connecting buyers and sellers.” Crypto-to-crypto exchange platforms, however, are exempt from the new Money Laundering Act.
Companies storing private keys on behalf of clients are considered to be involved in the transfer, storage or purchase of virtual currency. Therefore, all companies conducting such operations will have to follow these new laws. This, however, will not apply to companies offering private cryptographic key storage.
Companies in the crypto sector will have until January 15, 2019, to comply with the new Money Laundering Act, which stated: “The Ministry may in regulations lay down rules making this Act applicable to undertakings engaged in the mediation of financing by way of donation, and to exchange service platforms and custodian wallet providers of virtual currency.”
In explaining to what extent the new laws will apply, the authority stated that FSA has the duty to monitor money-laundering activities done by virtual currencies and storage providers. These new rules were created to stop potential illegal activities from taking place.
“Service providers are subject to the regulatory framework by virtue of the services they offer, regardless of how the service is organized. This also covers service providers that currently operate without being registered in the enterprise register, which operate over private accounts,” according to Finanstilsynet.
In addition, Finanstilsynet explained that crypto companies in Norway will be required to register with the authority and provide the necessary documents to show their operations. Finanstilsynet will also require customers to prove their identity and answer questions on the purpose of their transaction, the origin of their funds and so forth.
These rules also impose reporting requirements on crypto services providers in the country. However, this will not affect people who buy or sell their own cryptocurrencies for private purposes. It will also not affect these who occasionally assist friends and acquaintances with the purchase and sale of virtual currencies.
Companies who fail to comply with these new rules will have face penalties from the authority.
“Finanstilsynet will ensure that virtual currency exchange and retention providers comply with the money laundering rules. However, FSA does not have any tasks related to the monitoring of other parts of these providers, such as investor protection or advice requirements,” according to the government agency.