It is actually more efficient when data centers are relatively close to the users. That pretty much kills it for Iceland.
That said, the days are long gone when data centers operated at frigid temperatures and spent half their power supply on air conditioning. Nowadays, they are unbearably hot, and spend less than 15% on cooling. Choosing a cooler climate to save on cooling is less important than choosing a location with cheap energy to save on the actual bit crunching.