Iceland’s crypto industry has a promising future, but faces energy challenges.

The crypto industry in Iceland is “making progress” but has yet to reach its full potential, and many advantages – including those offered by its unique geography – have yet to be maximized.

Cointelegraph spoke with Güli Gíslason, Chief Investment Officer at Icelandic liquid token investment fund Visca Digital Assets, to better understand the opportunities and challenges facing his northern homeland.

To begin with, Gislason covers some familiar ground: the 2008 banking crisis, which hit Iceland harder than anywhere else.

In response to the crisis, the Icelandic government instituted capital controls, restricting the movement of the Icelandic krona, the national currency.

“It really opened people's eyes to cryptocurrencies as an asset class and, of course, blockchain technology,” Gislason said.

In the year In 2014, that public interest was further fueled when Iceland's own Satoshi Nakamoto – alias Baldur Frigjar Odinsson – downloaded AuroraCoin to the 330,000 people listed in the national ID database.

Gislason said: “It was never like big money or anything, but they brought this currency down to all the people of Iceland and everyone who was interested. They can only claim their tokens. And some people managed to transfer it to Bitcoin.

Still, Gislason believes Iceland has some distance to go in terms of crypto adoption and education.

” even if [Viska Digital] They have been actively managing funds in crypto, for two years now, I believe that the level of sophistication and recognition of crypto as an asset class is still very early and much more early than in the countries around us,” Gislason said.

“We're a little behind, but we're making efforts to get Iceland on the map and get to know investors,” Gislason said.

Rich in renewables, but energy is still tight.

Iceland is certainly not lagging behind when it comes to renewable energy. Due to its unique topography, more than a quarter of Iceland's energy is generated by geothermal energy. The country is located at the junction of the Eurasian and North American tectonic plates, making it one of the most geologically active regions on Earth.

Take a virtual trip to Iceland to see how BitDigital uses 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, and 99.98% of Iceland's total energy supply comes from renewable energy.

“Iceland is a country 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 dynamic buyers of energy and in recent years they have allowed Icelandic power producers to sell excess energy, otherwise using wasted energy,” said Gislason. “We don't have any submarine cables to Europe or the United Kingdom or the United States. So we are a closed electrical system.

Visca Digital Assets is familiar with Iceland's mining industry. The three founders are from a separate Bitcoin mining company called Greenblox, which is a joint venture with US miner BitDigital. But despite the great potential for Bitcoin miners in Iceland, there are also challenges that need to be overcome.

“Like the rest of the world, we used to subsidize the importation of electric vehicles, so the demand for electricity has increased. Due to regulatory restrictions, the development of new power plants was very limited, and today the market is in many ways completely weakened during the energy shortage,” said Gislason.

These pressures have fed into environmental concerns across the industry.

“This has created a false narrative by framing Bitcoin miners in Iceland when, in fact, they are buyers of otherwise unused energy, which is negative for the energy industry,” Gislason said.

So what about the future? Gislason is optimistic and believes the tide is starting to turn as officials wake up to the need for more energy.

“We're realizing now that we're doing too few power plants,” he said.

Visca Digital Assets

After discussing the climate for cryptocurrency in Iceland, the conversation moved to Visca Digital and what he was looking for in the potential investment of the hedge fund.

“The first criterion is to invest in sufficient liquidity of the tokens, so that we can move without actually affecting the price,” he says. “Another criterion is which market sectors we find most interesting. That's where the technology aspect of the group is important.

As Gislason explains, two of Visca Digital's six founders come from traditional finance, while the others have a more technical background.

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“We are very focused on staying in power for a long time, and therefore, we have a strong focus on proper risk management and choosing the right partners,” says Gislason, who talks about how the company's risk aversion has helped them stay away. Exposure to FTX or Silvergate Bank.

In conclusion, Gislason tells Cointelegraph what he sees when looking at the future of the industry as a whole.

“I believe we're at a very interesting point in the adoption s-curve,” says Gislason. “The time is coming when this is becoming more common. […]And major players like Blackrock and others are actively participating and starting to talk positively about Bitcoin and all crypto assets. […] I think this is the most exciting time we've ever had in crypto.