Crypto at a Crossroads: Some Provinces Wary of Tech’s Huge Appetite for Electricity
Supporters of cryptocurrency mining say the industry’s future in Canada hangs in the balance after several provinces moved to limit new projects earlier this year in response to concerns about their power consumption.
Crypto entrepreneurs — most of them focused on Bitcoin — have been drawn to Canada because of the abundant supply of clean, affordable electricity in provinces like British Columbia and Quebec. Most crypto operations need unfettered access to cheap power to operate the arrays of powerful computers required for crypto mining.
“Why Canada? So first of all we said, ‘What are the key ingredients you need to run this data service?'” said Dan Roberts, an Australian cryptocurrency entrepreneur whose company, Iris Energy, operates three facilities in B.C.
“Cool temperatures – very important. Legal stability, good regulatory jurisdiction. But most importantly, renewable energy.”
CBC News: The house20:20The power of cryptocurrency mining and its uncertain future
Roberts said he sees a new wave of economic prosperity growing out of cryptocurrency mining in provinces like BC, which currently have a power surplus.
“We can build a whole industry around this. We can go into the regional towns where they’ve been decimated by the end of the pulp and paper mill … hire local workers, retrain them and deliver all these benefits back to the community,” said he.
But some provinces have slammed the brakes on new projects, saying the mining sites — where computers run complex equations to verify cryptocurrency transactions on the blockchain ledger (earning digital assets as rewards) — use a staggering amount of electricity.
BC currently has seven mining facilities in operation, with six more in advanced stages of development. But it has also imposed an 18-month moratorium on connecting new crypto-mining projects to its electricity grid — and halted 21 other projects that the province says would have used the same amount of electricity as 570,000 homes.
Manitoba has also halted new crypto connections, while Hydro-Québec has set higher prices and a power consumption cap for mining projects. Ontario have suggested exclude crypto miners from an incentive program that could allow them to save money on electricity.
Uncertainty casts a shadow over future investments
Right now, Canadian crypto miners account for the fourth highest amount of computing power contributed to the blockchain network, after crypto operations in the US, China and Kazakhstan. Moves by some provinces to ration the sector’s access to electricity have some crypto enthusiasts questioning whether Canada will continue to be a major player.
“As a public company, I have shareholders and I have to pause or not make decisions until I know what the rules are. And when I know what the rules are, I look at whether to invest in Canada or somewhere more lucrative,” Sheldon said Bennett, CEO of DMG Blockchain Solutions and part of the Canadian Digital Asset Mining Coalition, an advocacy organization.
That was told by BC Energy Minister Josie Osborne The house BC’s decision to impose the moratorium was intended to give the province time to consult with industry to ensure the energy is used.
While BC has an energy surplus right now, Osborne said that may not always be the case.
“We don’t want to jeopardize that power. That’s why we need to take this break right now and instead use the power for the best opportunities in the future,” she told host Catherine Cullen.
Osborne argued that for BC to meet its climate and economic goals, it needs to look at other areas where electricity can be more useful.
“Cryptocurrency definitely doesn’t create the number of jobs that other industries do,” she said.
It also doesn’t help BC meet its climate goals, she added.
“Cryptocurrency mining does not reduce pollution in other industries,” she said. “We want to use that electricity for our mines and for forestry, for marine port operations, for hydrogen operations [so] we could use the hydrogen to mix natural gas and decarbonize there. We want to put those electrons to their highest and best use.”
Osborne signaled that her government is somewhat open to plugging new crypto operations in the future.
Cryptocurrency was once a trendy topic in Canadian politics. It was championed by Pierre Poilievre during his successful run for the Conservative leadership (he famously bought a shawarma sandwich with Bitcoin just under a year ago).
Poilievre suggested at the time that cryptocurrencies could allow ordinary Canadians to “opt out” of inflation because they are not influenced by central banks. That was before many cryptocurrencies crashed last year; Bitcoin’s value at the end of 2022 had fallen to about a quarter of what it had been the year before.
But policy development on crypto is moving forward. The Canadian Securities Administrators (CSA), the umbrella organization representing Canada’s provincial and territorial securities regulators, has been pushing for restrictions on crypto trading, while the Bank of Canada is in the middle of a review of digital assets.
The shift of some cryptocurrencies such as Ethereum – the second largest cryptocurrency – to what is known as a “proof of stake” system has eliminated the need for mining, and thus most of the currency’s energy consumption. That has given hope to some advocates that the energy argument against cryptocurrencies may one day be eliminated.
But Bitcoin remains on a “proof of work” model, where mining is the key. Bennett said he wonders about Canada’s willingness to engage in the new sector.
“What does Canada decide to do with this industry? Do they want to promote it and grow it? Do they value the technology, the jobs and the investment that’s coming into it and want to grow it?” he said.
“Or will it sit back and see how other countries manage?”