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Quebec Shuns Bitcoin Mining in Bid to Conserve Power

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TORONTO—The Canadian province of Quebec wants to stop selling cheap power to cryptocurrency miners amid the global energy crunch

The government-owned utility Hydro-Quebec asked a provincial regulator last month to reallocate the 270 megawatts of energy, equivalent to the energy consumed by roughly 97,000 households, that it had set aside for crypto mining.

The move is further pressuring a sector that is struggling with plunging crypto prices and the fallout from the failure of

Sam Bankman-Fried

‘s cryptocurrency exchange, FTX. 

It is also a sharp reversal from 2018, when the then-CEO of Hydro-Quebec said bitcoin business was necessary to boost provincial consumption to offset what he feared was declining demand that would put the utility into a “death spiral.”

Crypto imploded in 2022, as investors lost faith in digital assets and the industry was plagued with crisis. But unlike other collapses, it has largely avoided rippling into other markets. WSJ explains how crypto became so interconnected. Illustration: Mallory Brangan

At the end of the last year, Canada was the fourth-largest producer of bitcoin, behind the U.S., China—where illicit bitcoin mining continues despite a 2018 government ban—and Kazakhstan, according to the University of Cambridge Judge Business School.

Crypto miners use high-powered computers to generate bitcoin, a digital currency. Miners with many fast computers have an edge, and following China’s crackdown many flocked to Quebec for its cheap energy.

Hydro-Quebec charges the lowest rates for industrial power in North America, with average prices as of April 1 of 3.93 cents per kilowatt-hour in Montreal, its largest city, according to the utility’s data. Industrial customers in Houston paid an average of 10.33 cents. The average cost in North America is 8.22 cents, according to Hydro-Quebec.

Now, the utility says that demand for electricity in the province will grow 14% over the next 10 years and it needs to direct energy to higher priority areas, such as exports.

Quebec has signed agreements to provide power to New York City and Massachusetts. The provincial utility is trying to build transmission lines through Maine to supply power to New England, a project that could bring the province more than $7 billion in revenue over the next 20 years. 

The province’s energy regulator, Régie de l’énergie du Québec, is expected to rule on Hydro-Quebec’s reallocation request in the next few months.

“Our preoccupation is not to manage the growth of [the bitcoin mining industry], it’s to ensure there’s not acute pressure on our energy needs as a whole in the province,” said Cendrix Bouchard, a Hydro-Quebec spokesman.

A Bitcoin exchange in Montreal in March. Bitcoin prices have dropped from last year’s record high.



Photo:

Christinne Muschi/Bloomberg News

The Canadian province of Manitoba, too, said last week that it is imposing an 18-month moratorium on new crypto-mining projects. Manitoba’s finance minister cited the burden the operations put on its energy grid to justify the freeze.

In the U.S., several states are home to crypto miners. New York Gov.

Kathy Hochul

last month signed a two-year moratorium that will prevent bitcoin miners from reactivating fossil-fuel power plants for off-the-grid cryptocurrency mining in the state. Mining that taps into the electrical grid will still be legal. 

Quebec’s move won’t cut off power to existing miners in the province, said

Geoff Morphy,

President and Chief Operating Officer of

Bitfarms Ltd.

, a Toronto-based miner with facilities in seven mining sites in Quebec. Quebec’s curtailment could mean that expansion in the province will become more difficult, he said. The company has invested more than 350 million Canadian dollars, equivalent to around $256 million, in the province and employs more than 100 workers. 

Bitcoin mining was a lucrative business when the price of the currency was surging to record highs last year. But prices fell this year, and the tumble accelerated last month after the FTX cryptocurrency exchange collapsed.

Several crypto miners have started selling off machines, and some are flirting with bankruptcy.

Quebec’s decision prompted some publicly traded companies, such as London-based

Argo Blockchain

PLC, which runs two mining operations in the province, to reassure public investors that the move wouldn’t affect their existing operations.

Although FTX wasn’t involved in mining, the scandal makes it more difficult for miners to convince regulators that they should support the industry, said Ben Harper, a financial associate with crypto-mining-services firm Luxor Technology Corp., based in Seattle.

“Definitely, bad news like FTX makes our job harder,” he said.

Many bitcoin miners may leave for more welcoming regions with cheap electricity, such as Texas or Canada’s province of Alberta, said Mr. Harper. Bitcoin miners can move easily because the equipment is portable and miners can set up new warehouse facilities quickly, as long as they have access to energy.

“It’s one of the easiest industries to pick up and move,” he said. 

The U.S. quickly became the world leader in bitcoin mining after China cracked down on crypto last year. WSJ’s Shelby Holliday takes a look at what the global shift has meant for the bitcoin network, the energy industry and the environment. Photo: Mark Felix/Agence France-Presse/Getty Images

Write to Vipal Monga at vipal.monga@wsj.com

Copyright ©2022 Dow Jones & Company, Inc. All Rights Reserved. 87990cbe856818d5eddac44c7b1cdeb8



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