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 Bitcoinhave been drawn to Canada because of the abundant supply of clean, inexpensive electricity in provinces like British Columbia and Quebec. Most cryptooperations need unfettered access to cheappower 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."

CBC News: The House20:20The power of cryptocurrency mining and its uncertain future

Several Canadian provinces have moved to put limits on new cryptocurrency mining operations, putting into question Canadas place in the emerging sector. In a special report, freelance journalist Bob Keating speaks with entrepreneurs who are pushing for more mining operations in Canada and B.C. Energy Minister Josie Osborne speaks with host Catherine Cullen about why her province has hit the brakes on new operations.

Roberts said he sees a new wave of economic prosperity growing out of cryptocurrency mining in provinces like B.C., which currently enjoys anelectricity 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 equationsto verify cryptocurrency transactions on the blockchainledger (earning digital assets as a reward) consume a staggering amount of electrical power.

B.C. currently has seven mining sites in operation, with sixmore in advanced states of development. But it also has imposed an 18-month moratorium on connecting any new crypto mining projects to its electrical gridhalting 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-Qubec 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 powerbeingcontributed to the blockchain network, after crypto operations inthe 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 tohelp 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 decarbonizethere. 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 Poilievreduring his successful run for the Conservative leadership (he famously bought a shawarma sandwich with Bitcoin just under a year ago).

Poilievresuggested 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'svalue in late 2022 had dropped to about one-fourth of what it had been a year prior.

But policy development on cryptois moving forward. The Canadian Securities Administrators (CSA), the umbrella organization representingCanada'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 Ethereumthe 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?"