Editorial: Shall Drug Money Bring Northern Norway Into the Future?

International and partly unknown companies arrive all the more frequently in Northern Norway to produce so-called crypto currency. Is this due to innovative North Norwegian politicians and business leaders, or are we subjects to a robbery of cheap, subsidized and renewable electric power?

The question does not come out of thin air.

I was in a debate about low-emission societies and energy saving the other day. That debate is important and has been running for the past decades.

During the debate, I questioned whether using renewable North Norwegian energy to so-called crypto mining is a well-considered decision. The question stirred a veritable storm from North Norwegian politicians and bureaucrats, which I see as a sign that it is timely to ask how our exclusive and valuable power reserves are to be put into work.

North Norwegian business and politicians have loudly expressed their objections to surplus power from the region being sent south or even exported from the country. To counter this export, ambitious goals about power resources created in the North being used in the North have been presented – a quite legitimate demand.

The question is whether or not these ambitions are being realized when fairly unknown companies take over empty factories and surplus power at breakneck speed?

True, this power is not exported. It is rather used to fuel up computers whose first and foremost task is to dig out one or more of the 1889 different crypto currencies currently ruling the unregulated, in part criminal, international finance market.

Criminal activity

I have read page up and page down to find out what crypto currency or crypto mining really is. Understanding it is no easy task.

From those currently starting up such business in Northern Norway, the ruling mantra is that his is a move into future technology. However, terms such as data storage centers, block chain technology and production of crypto currency, or mining, is mixed together in a verbal caulderon.

• In its 2018 threat assessment report, Økokrim (the Norwegian National Authority for Investigation and Prosecution of Economic and Environmental Crime) highlights the use of crypto currencies as a source of funding of criminal activities. Nearly half of all bitcoin transactions were related to illegal activities. 
• The Norwegian Financial Supervisory Authority warns consumers against buying crypto currency and refers to it as ‘speculative products’.
• Bitcoin may wreak havoc on the welfare state, Finans Norge (the main industry organization for the financial industry in Norway) wrote just a year ago.
• Add to this the fact that estimates show that the power consumption used to dig out this currency is predicted to exceed the entire American power consumption within a year and a half. 

In addition, it is worth noting that crypto mining is defined as a power-intensive industry and as such subject to exemptions from Norwegian electricity taxation. Or, if you put it in other words: The state subsidizes this industry while we as consumers have to foot the bill.

Not to mention that the growth in crypto mining alone threatens the entire Paris Agreeement about climate emissions.

All these elements are completely absent in the debate about how to use the energy production surplus in the High North.

The conference that I initially referred to was organized by Enova, a state tool for reducing energy consumption and for reaching the goal of becoming a low-emission society. Based on what I can judge, it is a rather successful instrument. At the conference, noteworthy examples of how industry and estate have conducted successful, future-oriented energy saving measures were presented.

No one questions the fact that all these energy-saving measures are evened out through just a few hours of crypto mining.

As Nordland County receives an ever-growing number of actors on this market, supported by generous political applause, knowledge gaps the size of barn doors are revealed. It appears that the language used is chosen due to its ability to obfuscate. Crypto mining, data storage centers and block chain technology are just a few of the terms used interchangeably.

Projects introduced as data storage centers, often wrongfully mentioned in the same context as Facebook’s major initiative in Luleå, Sweden often end up revealing that they are all about producing Bitcoin, the most famous crypto currency, as soon as the opening fanfare music fades after the ribbon has been cut.

Several examples go to illustrate this:

The Glomfjord Example

Avisa Nordland recently stated that "a Japanese megacorporation is to build a data center” in two empty industry factories in Glomfjord. Again, it is about producing crypto currency.

The Norwegian facilitators and owners, who are only in charge of infrastructure (read: provide power and find empty industrial factories) are so far best known for their similar activities at Dale in Sunnfjord, further south in Norway. In Dale, the ‘mining activity’ consumes as much power as the entire Stavanger city. Inhabitants in the otherwise peaceful town despair over noise that makes them sleep depraved and has made it impossible to stay outside even on warm summer days.

Just like elsewhere in this industry, the companies’ front persons are present or former Norwegian politicians, whereas the current local mayors speak until their throats are sore about the local need for jobs. As is the case in Glomfjord, Nordland County.

Business and politics dream of new jobs, created by cheap and pure North Norwegian industry. An optimistic estimate indicates that the giant power consumption can create 12 to 15 jobs, jobs that require neither education nor special competences. The real owner of the company is possibly located in Japan, though that remains secret as of yet.

The Ballangen Example

Ballangen municipality near Narvik, Norway has, for a couple of years, surfed high on claims that a data storage center is to be built there. So far, nothing much has happened, other than a sale of the companies that hold the rights. The company that once launched its arrival in Ballangen with fanfares as it launched a proposal for a data storage center, Kolos, has since sold out to the Canadian company Hive for NOK 100 million (appr. USD 12 million). Someone has obviously made money, though it has not necessarily provided neither jobs nor increased income for the local municipality.

It is not really obvious what the new owners, Hive Blockchain, intend to do there. However, they will be mining crypto currency. There will still be jobs, though the new owners’ plans are a clear step down from what the municipality was presented with at earlier stages.

In May, the alleged plan was to build ‘a huge data center’ in what is frequently referred to as Ballangen’s best location; Ballangsleira. However, following the changes in ownership, the plans were reduced. Ballangsleira is left to its own device; there will rather be couple of barracks near the local convenience store. Because, as one of the actors explains, such activities do not require that much space. – But it requires significant amounts of electrical power.

He could have added: It does not require that much labor either.

Someone clearly got rich in Ballangen. So far, that does not apply to the host municipality.

The Ballangen example also goes to illustrate how fast ownership changes characterize this industry. One of the biggest owners of Canadian Hive is Genesis Mining, which is a pure-breed crypto currency company.

The Bodø Example

In Bodø, the image is even more complicated, if possible. This Arctic city has had a serious bout of ‘American fever’.

It started when the American Danny Hayes appeared in April 2018. It was claimed that he was the manager of a gigantic American fortune and he was received with standing ovations. The alleged fortune opened the doors to the media, to business and to politics. His future plans for Bodø were equally gigantic.

The alleged fortune was to provide infrastructure from Bodø to the North Pole, new port facilities, logistics about the future Smart City project of the new Bodø, as well as allegedly huge sponsoring of the local football team Bodø Glimt. At one point, there was even talk of buying the city’s Stormen culture center.

Even though this Hayes, according to himself, is an expert on the technology of the future, he is surprisingly absent from any digital platform. His name barely appears if entered on an internet search engine. As a contrast, his visit to Bodø left several and massive digital footprints.

Shortly after the doors to Bodø were opened, the plans were nevertheless reversed – and that at a breakneck pace that has barely been seen since the last winter storm ravaged the seaside of the city. Apparently there was not any money after all, and if there were, the problem was – according to Hayes – that they were tied up in some international trust. The American nevertheless continued his charm initiative.

When all pie-in-the-sky visions were removed, what was left was just one thing: the Americans wanted to build a data center. Or a ‘hyperscale’ data center, as coined by the local daily Avisa Nordland, withouth any further explanation of the term.

Frequent changes of ownership

Suddenly the money was available too. Not the old money, but new funds stemming from loans. A total of NOK 4 billion (nearly USD 500 million).

It was not just new money, there were also new companies, and old companies with new names. Apparently the American Danny Hayes had had a change of names too. When not operating in Bodø, his name is actually Keary D. Hayes II, though that does not leave any further digital footprints about his merits.

Bodø also goes to illustrate another characteristic of this industry; the ability to access local networks and gatekeepers. The managing director of the company was handpicked from a leading position in the local municipality, a job he left on extremely short notice because he had been promised a gigantic bonus. Not long after, he was out on sick leave, no longer with a job or a bonus, and once again new companies appeared.

The home page of the original company that knocked on all the doors in Bodø also listed local business leaders as partners. It appeared that they were to advise the Americans while also holding their leading positions in power production companies and were co-owners of the local company that was to facilitate the data center.

It may be too soon to conclude about whether this data center too is all about crypto currency. Because Hayes, the American, does not longer want to speak with the media. He rather refers the local online newspaper Bodø Nu to the infamous and far-from-cheap PR company First House. However, when contacted by Bodø Nu, Per Høiby, Managing Parner at First House, responds like this:

- First House has no assignments for Danny Hayes or his company. 

The so-called data center shall allegedly not be located in Bodø after all, but rather in nearby Fauske or rural Sørfold. Bodø has nevertheless, according to the American, been offered ten percent of the income. And just like First House, the Bodø Chief Administrative Officer has no knowledge of such agreements being proposed nor signed. 

While mining companies are established in empty North Norwegian industry factories, the Nordland D.A.’s office has investigated a major drug case in the region.

And in the very moment Glomfjord happily announced the establishing of a data center (albeit with a so far secret owner), the D.A. brought charges against five people. The fact that the drugs have been paid for using bitcoin has been a significant and complicating factor in the investigation.

A coincidence that draws attention to a small part of the dark side of crypto currencies as they work today. They are beyond any government control, and that applies whether it has been mined in factories in Glomfjord, Bodø, Fauske or Ballangen.

Currency for crime

This is a currency adjusted to crime, even when mined on the basis of pure, North Norwegian and renewable power, as the flow of prospects hitting the region indicate.

Nevertheless; the world needs data storage centers and high-level competence on block chain technology – and Northern Norway is suited for both.

Today’s landscape is confusing at best, and the debate about how to use our energy is completely absent. These values belong to the region, and a value debate is thus long overdue.

Because while North Norwegian business leaders and politicians praise any attempt at establishing such, some of the biggest international investors do obviously not share their views on crypto currencies. Warren Buffet, one of the world’s toughest investors, describes the bitcoin initiatives as a multiplication of rat poison.

- Digital currencies do not produce anything, he explained in a talk for investors in Nebraska earlier this year. His partner Charlie Munger argued that crypto currency trade is only suited for demented people. 

If we are to listen to Warren Buffet, North Norwegian surplus power is used to produce nothing at all.

Nor is Bill Gates (who, by the way, is no novice when it comes to digital platforms) very keen: - Crypto currencies are very risky, he stated.

- They do not produce anything. You kind of have to hope that an even bigger fool than you will show up, so that you can sell your investment, he explained to CNBC. 

The whole question boils down to the issue of resource ownership; about who are do benefit from the surplus, about how we want to use our resources.

We all remember the Terra Securities scandal; the story about how Norwegian municipalities were fooled and lost vast sums of money after being lured into investing in international financial instruments that they were completely incapable of managing. 

We also know the discussion about how fish quotas and landing companies have been sold to actors outside the region.

Production of crypto currency is by and large a combination of these events. About fairly unknown international actors promising the world, based on local resources.

Do they pay their sugar taxes?

We ourselves have to initiate a discussion about how we want to use our gold-rimmed pure surplus energy.

Should the profits created when water transforms from liquid form to hard currency benefit us, or largely unknown foreign companies=

We need international investments in North Norwegian business, however, we need to know what it delivers.

On the list of the world’s 1889 crypto currencies one finds one called ‘Legends Room’ – the same name as an infamous strip club in Las Vegas. The owner explains the club’s establishing of its own crypto currency to Motherboard:

- The first question customers ask me, is what it will say on the bill if they use their credit card. If we use crypto currency, that is no longer a problem. 

No, perhaps not.

Nor does it appear to be a problem that the state has decided to subsidize the production of crypto currency. The power consumption of this production is so enormous that the activity is classified as a power-demanding industry and thus exempt from electrical power tax.

However, there is no exempting crypto currency investors from the sugar tax when they are to sugar the pills offered to North Norwegian politicians and business leaders.