Crypto at a crossroads: Some provinces are wary of the technology's vast appetite for electricity
Proponents of cryptocurrency mining say the industry's future in Canada is hanging in the balance after several provinces moved to restrict new projects earlier this year in response to concerns about their electricity usage.
Crypto entrepreneurs — most of them focused on Bitcoin — have been drawn to Canada because of the abundant supply of clean, inexpensive electricity in provinces like British Columbia and Quebec. Most crypto operations need unfettered access to cheap power to operate the rows of high-powered computers required for cryptomining.
"Why Canada? So, first of all, we said, 'What are the key ingredients you need to run this computing service?'" said Dan Roberts, an Australian cryptocurrency entrepreneur whose company, Iris Energy, operates three facilities in B.C.
"Cool temperatures — really important. Stability of law, good regulatory jurisdiction. But most importantly, renewable energy."
Roberts said he sees a new wave of economic prosperity growing out of cryptocurrency mining in provinces like B.C., which currently enjoys an electricity surplus.
"We can build a whole industry around this. We can go into those regional towns where they've been decimated by the end of the pulp-and-paper mill … rehire local workers, retrain them, and deliver all these benefits back into the community," he said.
But some provinces have slammed the brakes on new projects, saying the mining sites — where computers churn through complex equations to verify cryptocurrency transactions on the blockchain ledger (earning digital assets as a reward) — consume a staggering amount of electrical power.
B.C. currently has seven mining sites in operation, with six more in advanced states of development. But it also has imposed an 18-month moratorium on connecting any new crypto mining projects to its electrical grid — halting 21 other projects which the province says would have used the same amount of power as 570,000 homes.
Manitoba also has paused new crypto hookups, while Hydro-Québec has set up higher rates and an electricity usage cap for mining projects. Ontario has proposed excluding crypto miners from an incentive program that could allow them to save money on electricity.
Uncertainty clouds future investments
Right now, Canadian crypto miners account for the fourth highest amount of computing power being contributed to the blockchain network, after crypto operations in the United States, 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 need to pause or not make decisions until I know what the rules are. And once I know what the rules are, I look at whether to invest in Canada or somewhere more lucrative," said Sheldon Bennett, CEO of DMG Blockchain Solutions and part of the Canadian Digital Asset Mining Coalition, an advocacy organization.
B.C. Energy Minister Josie Osborne told The House B.C.'s decision to impose the moratorium was meant to give the province time to consult with the industry to make sure energy is being put to good use.
While B.C. has an energy surplus right now, Osborne said that might not always be the case.
"We don't want to put that electricity at risk. It's why we have to take this pause right now and instead use the electricity for the best opportunities in the future," she told host Catherine Cullen.
Osborne argued that in order for B.C. to achieve its climate and economic goals, it has to look at other areas where its electricity might be more useful.
"Cryptocurrency definitely does not create the number of jobs that other industry does," she said.
It also does nothing to help B.C. achieve its climate goals, she added.
"Cryptocurrency mining doesn't lower pollution in other industries," she said. "We want to use that electricity for our mines and for forestry operations, for marine port operations, for hydrogen operations [so] we could use the hydrogen to blend natural gas and decarbonize there. We want to use these electrons for their highest and best use."
Osborne did signal her government is somewhat open to hooking up 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 in late 2022 had dropped to about one-fourth of what it had been a year prior.
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 pushed for restrictions on crypto trading, while the Bank of Canada is in the midst of a digital asset review.
The shift of some cryptocurrencies like Ethereum — the second largest cryptocurrency — to what's known as a "proof of stake" system has eliminated the need for mining, and thus for most of the currency's energy consumption. That's provided hope to some advocates that the energy argument against cryptocurrencies can one day be eliminated.
But Bitcoin remains on a "proof of work" model, where mining is key. Bennett said he wonders about Canada's willingness to engage with the new sector.
"What does Canada decide it wants to do with this industry? Does it want to foster it and grow it? Does it appreciate the technology, the jobs and the investment that's coming into it and want to grow that?" he said.
"Or does it want to sit back and see how other countries manage it?"