Can Canada Remain a Crypto Mining Hub After Manitoba Halts?

Canada has remained an odd regulatory alternative to the neighboring United States when it comes to cryptocurrency. While its licensing process is becoming more stringent than in some countries, Canada was the first to approve direct cryptocurrency exchange funds. Government pension funds have invested in digital assets, and crypto-mining companies have moved into the country to take advantage of cooler temperatures and cheap energy.

But the gold rush for Canadian miners may be slowing. In early December, the province of Manitoba – rich in hydroelectric resources – imposed an 18-month ban on new mining projects.

The move is similar to a recent initiative in the US state of New York that stopped renewing licenses for existing mining operations and required any new miners to prove work using 100% renewable energy.

These developments should not be dismissed as isolated cases. Both occurred in relatively cold regions with large hydroelectric profiles, so Manitoba’s tightening of the screws does not look optimistic for less sustainable energy regions.

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

natural readiness

In October 2021, Bitcoin (BTC) price rose above the $60,000 level. By then, Canada had become the fourth largest bitcoin mining destination in the world, with 9.55% of all bitcoins mined in the country (up from 1.87% a year earlier). The nation effectively filled the gap left by the campaign in China, which nearly eliminated mining activity in the country by 2021 — though the United States won the most of the campaign, rising from sixth to number one in terms of bitcoin hash rate.

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

This high score was achieved through a combination of lower electricity prices ($0.113 per kWh), lower average temperature (−5.35 °C), and higher human capital index (0.8).

The mining ban lasts for 18 months

Regardless of the country’s appeal to crypto miners, the province of Manitoba, which has the second lowest energy prices in Canada, set an 18-month moratorium on new mining operations in November. The decision was justified on the grounds that the new operations could endanger the local electricity grid. As Manitoba Finance Minister Cameron Friesen told CBC:

We can’t simply say, ‘Well, anybody can take anything [energy] They want to take it and we will simply build dams. The last one costs $13 billion if you price it in [transmission] Line.”

Friesen revealed that recent orders from 17 potential operators will require 371 megawatts of power, which is more than half the power generated by the Keeyask generating plant. According to him, demand from new miners will amount to more than 4,600 megawatts when other, less formal inquiries are included. There are currently 37 mining facilities in Manitoba, and their operations will not be affected by the ban.

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Also of concern is the relative lack of jobs offered by cryptocurrency miners. Cryptocurrency miners “can use hundreds of megawatts and have a handful of workers,” Friesen said.

The new normal?

Aydin Kilic, President and Chief Operating Officer of Canadian miner Hive Blockchain, doesn’t see the Manitoba issue as an isolated event. In early November, Hydro-Québec, which runs electricity across the Canadian province of Quebec, asked the government to release the company from its obligation to supply power to crypto miners. However, the situation does not imply a new normal either, Kilic told Cointelegraph:

“These pauses were put in place to give utilities time to evaluate existing crypto mining operations. The new normal in Canada will have crypto miners working with utilities to balance the grid or recycle energy in thoughtful ways, with an emphasis on sustainability.”

Given that Hive Blockchain uses heat from its 40,000-square-foot facility in Quebec to heat a 200,000-square-foot swimming pool manufacturing plant, Killick sees recent developments as an opportunity for local energy suppliers to figure out their approach to mining. staff.

Canadian utility companies have been bombarded with inquiries from overseas entities looking to take advantage of Canada’s cool climate and abundant hydropower resources. This, in turn, overshadows the demand from local digital asset miners who are focused on long-term partnerships, he emphasized:

“It is our hope that utilities can identify and prepare clients who are well-funded as long-term clients with a proven track record of implementing sustainability initiatives through their onboarding process.”

Kilic said building data centers requires a lot of investment. In this sense, a proper audit process that requires miners to meet certain capital requirements would greatly reduce the number of good applications. In his view, that would commit to balancing the network and sustainability as well.

Andrew Weber, Founder and CEO of Mining-as-a-Service, Digital Power Optimization, told Cointelegraph that Manitoba’s moratorium will not affect Canada’s attractiveness as a mining destination due to more fundamental factors such as the rule of law and the massive amounts of excess energy that must be consumed by tech-savvy miners:

“Energy companies that use bitcoin mining as a tool to help improve their generation assets will be a growth area for mining, so we think more and more of this will be done in places where they are already addressing an energy problem.”

Weber stated that bitcoin miners do not use energy that is in high demand due to simple price factors. They may even make the grid more resilient and resilient by providing a profitable payload that can be easily shut down when the grid-dependent power demand increases. Kilic confirmed this idea, claiming that his company can shut down in a matter of seconds when the network is stressed.

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Only time will tell if Manitoba lawmakers and regulators will agree to this reasoning; However, the stakeholders remain optimistic. Weber expects to see more mining in both Manitoba and New York “over a decade,” while, in Killick’s words, Canada has some of the best geographies for digital asset infrastructure worldwide and shouldn’t miss out on building that infrastructure. infrastructure.