Can Canada Remain a Cryptocurrency Hub After Manitoba’s Moratorium?

Canada has remained a regulatory alternative to neighboring United States regarding cryptocurrency. Although the licensing process has become more stringent than in some countries, Canada has become the first country to directly approve cryptocurrency exchange funds. Public pension funds have invested in digital assets and cryptocurrency companies have moved to the country to take advantage of cool temperatures and cheap energy prices.

But the gold rush for miners in Canada may be slowing. In early December, the hydropower-rich province of Manitoba imposed an 18-month moratorium on new mining projects.

The move was similar to a recent initiative in the US state of New York that halted license renewals for existing mining operations and required any new proof-of-work miners to use 100% renewable energy.

These developments cannot be described as isolated cases. Both occurred in relatively cool regions with significant hydroelectric power profiles, so bolting in Manitoba does not seem optimistic for low-energy regions.

Could this change Canada’s status as a haven for miners?

Natural inclination

In October 2021, the price of Bitcoin (BTC) rose above $60,000. By then, Canada had become the fourth largest destination for BTC mining in the world, with 9.55% of all Bitcoin mined in the country (up from 1.87% a year earlier). The nation has effectively filled the void created by the crackdown in China, which has virtually eliminated mining in the country by 2021 – although the US has benefited the most from the crackdown, rising from sixth to first in terms of Bitcoin hash rate.

Technician at Bitcoin mining operation. Source: Paul Chiasson/The Canadian Press

The Canadian government did not have to make special efforts to attract the interest of global miners after the fall of China. The country has two obvious advantages to everyone: its cool climate and abundant water power. A 2021 study by the DEKIS Research Group at the University of Avila ranked Canada 17th in the world for sustainable mining potential, higher than the United States (25th), China (40th), Russia (43rd) or Kazakhstan . 66).

The high result was made possible by a combination of low electricity prices ($0.113 per kilowatt hour), low average temperature (−5.35 Celsius) and high Human Capital Index (0.8).

The mining ban will last for 18 months

Regardless of the country’s attractiveness to cryptocurrency miners, the province of Manitoba, which has the second-lowest energy prices in Canada, imposed an 18-month moratorium on new mining operations in November. The decision was based on the fact that the new operations could damage the local power grid. Manitoba Finance Minister Cameron Friesen told the CBC:

“We can’t just say that everyone can buy everything [energy] they want to buy, and we will simply build dams.” The price of the latter is 13 billion dollars [transmission] line.”

Friesen announced that the 17 potential operators will request 371 megawatts of power for their final applications, more than half the power produced by the Keeyask power plant. According to him, the demand from new miners will exceed 4,600 megawatts, including other, less formal requests. There are currently 37 mining facilities in Manitoba that will not be affected by the ban.

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Another concern was the relative lack of jobs provided by cryptocurrency miners. Friesen said that cryptocurrency miners “can use hundreds of megawatts and have a handful of workers.”

The new normal?

Aydin Kılıç, president and chief operating officer of Canadian cryptocurrency company Hive Blockchain, does not see the Manitoba incident as an isolated incident. In early November, Hydro-Quebec, a firm that manages electricity across the Canadian province of Quebec, demanded that the government release the company from its obligation to power cryptocurrency miners. However, the situation does not indicate a new normal, Kılıç told Cointelegraph:

“These moratoriums exist to give utilities time to evaluate existing crypto-mining operations. The new normal in Canada will involve cryptocurrency miners working with utilities to balance the grid or thoughtfully recycle energy with a focus on sustainability.

Given that Hive Blockchain uses heat from its 40,000-square-foot facility in Quebec to heat its 200,000-square-foot pool manufacturing plant, Kılıç sees recent events as an opportunity to understand local energy suppliers’ approaches to mining. operators.

Relief map of Manitoba showing significant water resources of the province. Source: Carport

Canada’s utilities have been bombarded with inquiries from offshore entities looking to take advantage of Canada’s cool climate and vast hydropower resources. This, in turn, has overshadowed demand from local digital asset miners who focus on long-term partnerships, he stressed:

“We hope that utilities can identify from the onboarding process which customers are well-funded and established as long-term customers experienced in sustainability initiatives.”

Kılıç said that the establishment of data centers requires a large investment. In this sense, a sound vetting process requiring miners to meet certain capital conditions would greatly reduce the number of bona fide applications. According to him, it will also commit to network balance and sustainability.

Andrew Webber, founder and CEO of cryptocurrency company Digital Power Optimization, told Cointelegraph that the moratorium in Manitoba will not affect Canada’s attractiveness as a mining destination, for example: the law and the large amount of excess energy that will be consumed by technologically efficient miners:

“Energy companies using Bitcoin mining as a tool to help optimize their generation assets will be a growth area for mining, so we think it’s going to be where you’re solving more energy problems.”

Webber said that Bitcoin miners do not use the power that is in high demand due to simple price factors. They can even make the grid more flexible and resilient by providing a cost-effective load that can be easily shut down when grid-based energy demand increases. Kılıç confirmed this idea, claiming that the company can be shut down in seconds when the network becomes stressed.

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Only time will tell if legislators and regulators in Manitoba agree with this reasoning; however, stakeholders remain optimistic. Webber expects to see more mining in both Manitoba and New York “within a decade,” while Canada has the best geography for digital asset infrastructure in the world and should not miss the opportunity to build it, according to Kılıç. .