The crypto industry in Iceland is “making strides” but has yet to reach its full potential, and several advantages — including those offered by its unique geography — have yet to be maximized.
Cointelegraph spoke with Gulli Gislason, chief investment officer at the Icelandic liquid token investment fund Viska Digital Assets, to better understand the opportunities and challenges facing his northern homeland.
To begin with, Gislason covered some familiar territory: the 2008 banking crisis, which hit Iceland harder than almost anywhere else.
In response to the crisis, the Icelandic government instituted capital controls, restricting the movement of the Icelandic króna, the national currency.
Gislason said, “It really opened people’s eyes for cryptocurrencies as an asset class and, of course, blockchain technology as well.”
In 2014, that public interest was further stimulated when Iceland’s very own Satoshi Nakamoto — the pseudonymous Baldur Friggjar Óðinsson — airdropped Auroracoin to the 330,000 people listed in the national ID database.
“It never became like a big currency or anything,” says Gislason, “But they actually airdropped this currency to all the Icelandic people and everyone who was interested. They could just claim their tokens. And some of the people managed to transfer it into Bitcoin.”
Even so, Gislason believes that Iceland has some distance to travel in terms of adoption and crypto education.
“Although [Viska Digital] have been actively managing funds within crypto for around two years now, I believe the level of sophistication and acknowledgments of crypto as an asset class is still very early and even more early than the countries around us,” Gislason said.
“We are a little bit behind, but we are making strides to get Iceland on the map and get the investor base familiar with it,” said Gislason.
Rich in renewables, but energy still tight
Iceland certainly does not lag when it comes to renewable power. Thanks to its unique geography, over a quarter of Iceland’s power is generated by geothermal energy. The country lies at the convergence of the Eurasian and North American tectonic plates, making it some of Earth’s most geologically active terrain.
Take a virtual trip to Iceland to see how Bit Digital utilizes 100% carbon-free renewable energy sources from water and volcanoes to generate #Bitcoin pic.twitter.com/N6b97gtGbi
— Bit Digital, Inc. NASDAQ:BTBT (@BitDigital_BTBT) August 31, 2023
The island nation also has significant hydropower and wind power, with 99.98% of Iceland’s total power supply coming from renewables.
“Iceland is a country which is rich in renewable energy,” Gislason said.
And as Gislason points out, this makes it ideal for Bitcoin (BTC) mining.
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“Bitcoin miners are flexible buyers of power and have allowed Icelandic power producers to sell excess energy in recent years, utilizing otherwise wasted energy,” Gislason said. “We don’t have any underwater cables to the mainland of Europe or the United Kingdom or the United States. So we are a closed electricity system.”
Viska Digital Assets is very familiar with Iceland’s mining industry. Three of its founders are also involved with Greenblocks, a separate Bitcoin mining firm operating in a joint venture partnership with the U.S. miners BitDigital. But while there is huge potential for Bitcoin miners in Iceland, there are also challenges that need to be overcome.
“Like all the world, we’ve been making subsidies for imports of electric vehicles, so the demand for electricity has gone up. Development of new power plants has been minimal due to regulatory constraints, and today the market is in many ways fully tapped with periods of energy shortages,” acknowledged Gislason.
These pressures have fed into environmental concerns about the industry.
“This has created a false narrative in Iceland framing Bitcoin miners as being a net negative for the energy industry when they have, in fact, been a buyer of otherwise unused energy,” asserts Gislason.
Then what of the future? Gislason is optimistic and believes the tide is beginning to turn as officials wake up to the pressing need for more energy.
“We are understanding now that we have been making way too few power plants,” he said.
Viska Digital Assets
After discussing the climate for cryptocurrency in Iceland, the discussion moved on to Viska Digital and what the hedge fund looks for in a potential investment.
“The first criteria is, of course, investing in tokens with sufficient liquidity so we can actually move around without affecting the price,” he says. “And another criteria is focusing on what sectors of the market we find most interesting. There, the technology aspect of the team comes in handy.”
As Gislason explains, two of Viska Digital’s six founders come from traditional finance, while the others have more technical backgrounds.
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“We focus very much on having staying power for the long run, and therefore, we have a high focus on having proper risk management and selecting the right counterparties,” says Gislason, who goes on to recount how the firm’s risk aversion helped them avoid exposure to FTX or Silvergate Bank.
To conclude, Gislason tells Cointelegraph what he sees when he looks to the future of the industry as a whole.
“I believe that we are on the most exciting stage of the adoption s-curve,” says Gislason. “We are approaching a time where this is getting much more mainstream [...], and predominant players like BlackRock and others are starting to participate actively and talking positively about Bitcoin and all the crypto assets [...] I think this is probably the most exciting time that we have experienced in crypto.”