The cryptocurrency boom risks crashing Iceland's economy

Iceland's government worries that cryptocurrencies could severely damage its economy if their boom ends in a bust. It would be especially devastating for a country that is still recovering from the huge financial crash that crippled its economy just a decade ago. Despite being a remote volcanic island with just 334,252 inhabitants, the crypto threat “cannot be excluded as a risk factor”, says finance minister Bjarni Benediktsson.

About 90 percent of the power consumption of Iceland’s datacenters last year was dedicated to the mining of cryptocurrencies; this year, it’s expected to surge further. That is “a huge risk factor for the local industry”. This fragility reaches way beyond the digital world. In March, Icelandic police arrested 11 people sought in connection with break-ins at four of the country’s data centers. The robbers had stolen 600 servers that had been busy with crypto mining, with a hardware value of almost $2 million in the burglaries in December and January.

For most data centres in Iceland, crypto miners are one of many industries using their hosting services. Quite a number, however, are dedicated to crypto mining. Take the Moonlite Project, which is due to come online later this summer, supporting a new data centre that will host servers for crypto miners who want to mine bitcoin, bitcoin cash, DASH and litecoin on an industrial scale. It will have an initial capacity of 15 megawatts and will aim to produce about $8 million per month in mined currency.